Study Guide Midterm Flashcards
What is improvement ON the land?
Includes any fixed structures such as buildings, fences, walls, and decks.
What is improvement TO the land?
Include the components necessary to make the land suitable for building construction or other uses: streets, walkways, stormwater drainage systems, electric, telephone utilities
What is a tangible asset?
Include real and personal property: land, buildings
What is an intangible asset?
nonphysical; contractual rights, financial claims, interests, patents, or trademarks. e.g. bonds, mortgages, lease agreements
What are the three different sectors in the economy that real estate values are derived from?
User markets, Capital markets, and Property markets.
What are examples of a real estate asset that trades in the public or private markets?
Investible assets?
What is economic base?
Activities that bring income into the city
What is economic multiplier?
As the base goes up, so does the city. Base income is re-spent, producing additional income
What are secondary activities?
Activities that recirculate income in a city (local government, local merchants and services)
What are convenience goods?
A product or service that is easily accessible and frequently purchased by consumers with minimal effort (e.g. nail salons, hair salons, drug stores, coffee shops, etc.)
What are comparison goods?
Buyers compare many goods; motivation for car dealer row-> shop around before buying
What are some factors that impact the growth of a city?
Transportation, Production, Technology,
What are externalities general?
a ‘side effect’ of commercial activity that impacts other parties
What are negative externalities?
Adverse effect on Property Value…
- Factory smoke
- Light ‘pollution’
- Traffic/congestion
What are positive externalities?
Beneficial effect on Property Value…
- Parks
- Schools
- Architecture
Why is it important to analyze development and its effect on surrounding areas?
market failure, we build this city
What are examples of land use controls?
building codes, zoning, subdivision regulations
What are traditional features of zoning?
- Use classifications:
Residential, commercial, industrial, automotive. - Use districts (zoning map).
- Setback requirements.
Side, front and back. - “Bulk” or density limits.
Minimum lot size, height limits, maximum floor area ratios. - Special use districts:
Service stations, hospitals, churches, private schools, cemeteries.
What is eminent domain?
The right of the government to acquire private property, without the owner’s consent, for public use, in exchange for just compensation
What is the importance of the elements of a lease?
is a prerequisite to understanding CRE markets and values.
What are the the advantages and disadvantages of varying lease terms?
All else equal, longer lease terms:
- Minimize transaction costs (leasing commissions-> usually landlord covers it) have to pay a broker to find a tenant
- Provide rental rate security for tenant & owner
- Decrease tenant & owner flexibility (if the market is going up and down it benefits the tenant and landlord accordingly)
What are the different lease types as it pertains to the tenant’s coverage of expenses?
- Gross lease: landlord pays all expenses
- Net lease: landlord pays property taxes
- Net-Net Lease: landlord pays Property Taxes and Insurance
- Triple Net Lease: tenant pays all operating expenses
What is a tenant improvement allowance?
- The amount the landlord agrees to spend to build out the space to meet the needs of the new tenant’s business
- More common in Retail, Office, Industrial than Hotels and Apartments
- The magnitude of TI is heavily negotiated lease term.
What is a concession?
- Supply in local market exceeds demand
- The landlord is more willing to negotiate
Can include one or more of the following: - Free month’s rent
- Reduced rent for a period
- Landlord covers moving expenses
- Cost to terminate a prior lease.
