study guide chapter 17

Question 1

liquidity:

Answer 1

An asset that cannot be sold quickly for cash. Illiquidity is a disadvantage of real estate investing. Real estate is illiquid and immobile (local) (pg 320)

Question 2

Static Risk:

Answer 2

a risk that can be transferred or offset with insurance. (pg 324)

Question 3

Operating Statement: ACRONIM

Answer 3

Parents PGI
Visit - V&C
Only + OI
Every = EGI
Other - OE
Night = NOI
Minus ADS (Mortgage Pymt)
= CTF (BTCF)

Question 4

Operating Expenses include:

Answer 4

Fixed, Variable Expenses and Reserves (FEVER). Annual debt Service is NOT part of the Operating Expenses. They are calculated after the NOI. (pg 327)

Question 5

Percentage of Profit on Investment:

Answer 5

Amount Made/ Amount Paid

Question 6

Liquidation Analysis:

Answer 6

the appraisal of a profitable business is a composite of the value of real estate, tangible and intangible assets, personal property, Goodwill etc. The value of a business that is expected to continue (profitable) is Going Concern value)