What is encumbered real estate? What does title clarify? What’s a Cap rate? Be thorough in your discussion of all the inputs. How does this differ from Discounted Cash Flow analysis?
Finish the question
SHORT ANSWER (20 points each, 100 total): PICK FIVE (5) OF TEN (10), AND ANY MORE FOR UP TO 20 EXTRA CREDIT POINTS).
My goal for this part is not to determine if you can “parrot” answers, but rather to see how you have advanced in thinking about “risk and opportunity”. Write legibly, as I will not grade what I cannot read. Evaluate these statements. You will be evaluated by the comprehensiveness and clarity of your answers.
- React: Prop At 1% ad valorem, the tax appears to be an out sized discussion for such a small operational cost.
- React: The most critical aspects of a lease for a shopping mall are the annual base rent and the pass-through of CAM charges.
- React: The due diligence process for a property is a legal exercise and is not of much concern to the business people making the investment. Don’t forget a breakdown of key aspects.
- What is encumbered real estate? What does title clarify?
- In a profitable transaction when you are selling a property, what is true about the going in and exit cap rates? Assume cash flow is the same throughout. Why?
- There is no necessary correlation between profitability and these cap rates
- The going in cap is equal to the exit cap
- The going in cap is higher than the exit cap
- The going in cap is lower than the exit cap
WHY?
- React: Reducing a tenant’s monthly rent by $100 every month is a wise investment in landlord tenant relationships.
- What’s a Cap rate? Be thorough in your discussion of all the inputs. How does this differ from Discounted Cash Flow analysis?
- React: The financial pro forma for a property represents the financial performance which will be realized by the property, and as such reflects the risks of the investment.