Section 1 Fundamentals Flashcards
Littoral
Water rights non flowing
Riparian
Flowing water rights
Area of a circle
Pi R2
Area of an oval
Pi •r1•r2
Rt
Terminal cap rate
Enablements
annual plants & crops
Appurtenant
added to the land and passes with title (easement, tree)
Attachment
lien
Entitlement
governmental approval
Investment value
value to a lass of investor based on investment criteria
Use value
value for a specific use to a specific user
Enterprise value
used to be business value
Points
1% of the loan
Fair value
accounting term/also a term used in tax assessment
Market area
area with subject and a majority of the subject’s competition
Competitive Market area
area with the subject and all of its competition
Money markets
market trading short term money instruments < one year
Capital markets
market trading long term money instruments > one year
Hypothetical condition
known to be false
Extraordinary assumption
uncertain information assumed to be correct
Stabilized occupancy
level of occupancy for a specific property or class of property when it is capturing its appropriate share of demand
Transitional vacancy
vacancy temporarily different than a new level of stabilized vacancy
market vacancy
actual vacancy for a property type
frictional vacancy
the typical minimum vacancy needed for the market to function
GBA
gross building area measured from the outside of the exterior walls (condos interior walls)
GLA Gross Living Area
gross living area - finished and heated space above grade for single & multi unit residential- exterior dimentions (condos interior).
GLA Gross Leasable Area
shopping centers - exterior walls, half of demising walls
NRA Net Rentable Area
space on which tenants pay rent - gross building area less vertical floor penetrations (includes common areas)
Io (1)
NOI
Ro (2)
going in cap rate, initial cap rate
Vo (2)
PV, value of overall property
Ie (4)
Income to equity, pre tax cash flow, equity dividend, cash on cash
Re (5)
Rate to equity, equity cap rate, equity dividend rate, cash on cash rate, cash flow rate
Ve (1)
down payment
Im (3)
income to mortgage, annual debt service, annual loan payment
Rm (4)
Mortgage constant, rate to mortgage, loan constant, mortgage cap rate, loan amortization factor
Vm (4)
value of the mortgage, loan balance, unpaid loan principal, amount borrowed at the beginning of the loan
I t (3)
Terminal income, exit income, reversionary income
Rt (3)
terminal cap rate, exit rate, going out rate
Vt (5)
terminal value, reversion, resale, future value, FV, exit value
3 kinds of change
total, compounded, straight line
Total change (4)
level, stable, fixed, constant
Straight line change (2)
constant amount, straight line (+50, -10)
Compounded change (5)
exponential, percentage, constant ratio, compounded, percentage
Return of
recapture, recovery
Yield rate (3)
discount rate, return on and IRR
Percentage (2)
Ratio, proportion
Model (2)
formula, relationship
Holding period (2)
ownership period, projection period
M
LTV loan to value ratio, mortgage ratio
Yo
return on the whole investment over the holding period
Ye
return on the equity investment over the holding period
Ym
percentage return on the mortgage - interest rate when there are no points/costs
Four forces that influence value
GEES government, enviornmental, economic, social
Four factors to create value
DUES demand, utility, effective purchasing power, scarcity
Four agents of production
CELL Capital, Entreprenurial coordination, land and labor
Four powers of government
PETE Police, Eminent domain, taxation, escheat
Escheat
right to take title when someone dies w/o a will
Four stages of a neighborhood
GSDR growth stability, decline revitalization
Four test of H & B Use
PLFM - physically possible, legally permissible, financially feasible, maximally productive
Four components of a market cycle
ECRR - expansion, contraction, recession, recovery
15 Economic Principles - Anticipation
value is created by expected future benefits
15 Economic Principles - Change
the result of the dynamic interaction of the 4 forces that create value (GEES)
15 Economic Principles - Supply & Demand
quantity of goods, products & services and the amount desired by consumers
15 Economic Principles - Substitution
buyer will pay no more than the cost to acquire an equally desireable alternative assuming no undue delay
15 Economic Principles - Balance
value is maximized when the 4 agents of production (CELL) are brought together in the propert proportions
15 Economic Principles - Competition
interaction of market participants
15 Economic Principles - Contribution
the amount a component adds to a larger property or value loss if its missing
15 Economic Principles - Conformity
value is maximized when the property conforms to the demands of the market
15 Economic Principles - Surplus productivity
net income remaining after the agents of production have been paid (CELL)
15 Economic Principles - Law of Decreasing Returns
additional expenditures beyond a certain point will not yield a return commensurate with the additional investment
15 Economic Principles - Externalities
factors outside a property can have positive or negative effects on value
15 Economic Principles - Progression
value of an inferior property can be enhanced by better properties nearby
15 Economic Principles - Regression
value of a superior property can be degraded by inferior properties nearby
15 Economic Principles - Opportunity Cost
the cost of an option not chosen
15 Economic Principles - Consistent Use
improvements must be valued in a fashion that is consistent with the highest and best use of the underlying land
5 tools used by the Fed to Influence the Economy
control money supply, open market policy (buy sell bonds), set the discount rate, set the federal funds rate, setting the reserve requirement (regulationT).
Risk
the probability a foreseen event will not occur
Financial risk
the risk associated with debt, risk of foreclosure
market risk
risk that shifts in supply or demand will degrade value
capital market risk
risk that the avalaiblity of capital will impair value
Value converters
cap rates and yield rates increase with more risk, multiplers decrease
sensitivity analysis
how much one dependent variable changes the answer
scenario analysis
a study of 3 outcomes that would occur by changing more than one variable - pessimistic, most likely and optomistic
Mile (3)
5,280 l.f., 320 rods, 80 chains
Rod
16.5 feet
Chain
66 feet 0.1 furlong
Furlong
660 feet
Metes & Bounds
point of beginning, boundaries, meets back at the end
Rectangular Survey System
(public land survey system) each block is a 640 acre Township, 6 miles by 6 miles, 36 one square mile blocks
Township
1 square mile block, 36 square miles, 640 acres
Range
stacked vertical townships numbered east and west of the principal meridian
Principal Meridian
lines that run north and south to separate townships
Base Lines
lines that run east and west to separate townships
Lot and block system
a subsystem of the rectangular survey system
Ownership in severalty
sole ownership (person, REIT, corp, partners)
Co-ownership
ownership held by 2 or more parties or entitites
Tenants in common
(co-ownership) with undivided fractional interest, passes on death in accordance with will
Joint tenants
(co-ownership) interest passes to other owner on death of one
Tenancy by the Entirety
(co-ownership) for married couples with equal undivided interest w/ right of survivorship
