SU # 63__Commercial Property Investments Flashcards
What do we call the idea that money available at the present time is worth more than the same amount in the future, due to its potential earning capacity?
Time value of money
List three other risk factors an investor must consider besides financial risk.
Business risk
Inflation risk
Management risk
What is liquidity?
A term that refers to an asset’s ability to be easily converted through an act of buying or selling without causing a significant movement in the price and with minimum loss of value.
How is financial leverage created?
Financial leverage is created by mixing borrowed funds with equity (the cash contributed by the investor).
What is probably the riskiest of all property investments?
Investment in unimproved or undeveloped property
Typically how many floors will you find in low-, mid- and high-rise office buildings?
Low-rise – Usually 1 to 3 floors
Mid-rise – 4 to 15 stories
High-rise – Normally over 15 stories tall
List two reasons investors purchase residential property.
To keep for the long term benefits
To flip in hopes of a quick profit
List three advantages of investing in a single-family home.
There is usually a large selection of properties available from which to choose.
Management of a single residence can be easier than with other types of income properties.
The investment is more liquid than other kinds of property.
If a buyer wanted to purchase a vacation home as an investment, what would be considered an important criterion in choosing the home?
It should be close to a popular recreational interest, such as a ski resort or a lake, or be in a year-round warm, sunny location.
List two advantages of purchasing a condominium as an investment.
Ease of rental
Services provided by the association do not have to be provided by the owner
What is the most important consideration when deciding to purchase a fixer-upper as an investment?
What the demand for the property will be when it’s ready for resale.
List two advantages and two disadvantages of investing in a two-to-four unit dwelling.
Advantages
Properties of this size can be found in most communities.
Tenants often pay all of their own utilities and do repairs.
Disadvantages
Fewer of these types of buildings are being newly built, so they are becoming harder to find.
Due to the growing scarcity, it is becoming more expensive to purchase units that already exist.
What is mixed-use development?
The practice of allowing more than one type of use in a building or set of buildings.
What is the main tenant in a shopping center called?
Anchor tenant
What is the difference between a warehouse property and a manufacturing property?
A warehouse property focuses on storage and distribution of goods.
Manufacturing buildings are large facilities designed to accommodate the equipment for various manufacturing processes.
Name two advantages of investing in commercial property.
Unlike apartment properties, there is very little risk of any kind of rent control.
Business tenants are generally easier to deal with than apartment house tenants.
The government is most likely to pass rent control laws on which kind of property?
Shopping center
Industrial park
Office building
Apartment building
Apartment building
Which statement is true about rent controls?
Imposing rent controls enhances rental income.
Yields on apartment buildings increase under rent controls.
Rent controls increase the capitalized value of apartment buildings.
Rent controls cause yields on apartment buildings to decrease.
Rent controls cause yields on apartment buildings to decrease.
Alan Baldwin wants to purchase a vacation home as an investment. Which of the following locations would probably be the least desirable for this endeavor?
Chicago, IL.
Naples, FL.
Aspen, CO.
Gulf Shores, AL.
Chicago, IL.
Which type of retail center is anchored by three or more full-line department stores?
Outlet center
Neighborhood center
Mega mall
Specialty center
Mega mall
Which of the following best defines risk?
A loss
The chance of experiencing a loss
Recklessness
Responsibility for damages
The chance of experiencing a loss
Which of the following is NOT a characteristic of liquidity?
Rapid conversion
Minimal loss of value
Lull in the regularly-traded market
Ready and willing buyers at all times
Lull in the regularly-traded market
Jim Smith wants to purchase a vacation home and have it double as an investment. What is the maximum amount of time per year that Jim and his family can stay in the home and still be able to take the depreciation?
14 days
30 days
45 days
60 days
14 days
What is the concept of using other people’s money for investing?
Rate of return
Leverage
Debt service
Time value of money
Leverage
