Video 8: Real Estate Jargon Explained
Take this quiz to recap everything that was discussed in video eight.
LTV or loan-to-value is the ratio of...
YOU'RE CORRECT!
Loan-to-value is the ratio of debt to the property value. The higher the LTV, the more leveraged the property and the riskier the investment.
YOU'RE WRONG!
Loan-to-value is the ratio of debt to the property value. The higher the LTV, the more leveraged the property and the riskier the investment.
Why is the debt coverage ratio always lower than the interest coverage ratio?
YOU'RE CORRECT!
Interest coverage is the ratio of income to annual interest, and debt coverage is interest plus amortization.
YOU'RE WRONG!
Interest coverage is the ratio of income to annual interest, and debt coverage is interest plus amortization.
Which of the following is a situation involving PIK financing?
YOU'RE CORRECT!
PIK financing, or payment in kind, is used when you can't cover an interest payment, so you take out more debt to do so. PIK financing is generally more prevalent at the end of a cycle, when you are optimistic about an income increase.
YOU'RE WRONG!
PIK financing, or payment in kind, is used when you can't cover an interest payment, so you take out more debt to do so. PIK financing is generally more prevalent at the end of a cycle, when you are optimistic about an income increase.
What is 46 bps in terms of percentage?
YOU'RE CORRECT!
One bp, or basis point, is equivalent to one percent of one percent.
YOU'RE WRONG!
One bp, or basis point, is equivalent to one percent of one percent.
Why might your actual annualized NOI be lower than the projected annualized NOI?
YOU'RE CORRECT!
There are regular costs of operating that might occur one month per year; if you only took January through April into your projections and you have a yearly payment due in June, not calculating that in your projections will cause the actual yearly NOI to be lower than projected.
YOU'RE WRONG!
There are regular costs of operating that might occur one month per year; if you only took January through April into your projections and you have a yearly payment due in June, not calculating that in your projections will cause the actual yearly NOI to be lower than projected.
What is the point in calculating stabilized NOI?
YOU'RE CORRECT!
Stabilized NOI is a method of determining what NOI should look like given that you are operating in regular operating conditions. For example, if occupancy is lower than what it usually is it will not affect stabilized NOI calculations.
YOU'RE WRONG!
Stabilized NOI is a method of determining what NOI should look like given that you are operating in regular operating conditions. For example, if occupancy is lower than what it usually is it will not affect stabilized NOI calculations.
When someone says they signed a tenant to a 5-year contract with 6 months free rent, what does that mean?
YOU'RE CORRECT!
Free rent is simply jargon meaning the tenant doesn't have to pay rent in whatever period is assigned.
YOU'RE WRONG!
Free rent is simply jargon meaning the tenant doesn't have to pay rent in whatever period is assigned.
Which of the following is not a tenant improvement?
YOU'RE CORRECT!
Re-doing the parking lot is a capital expense having nothing to do with the tenant space.
YOU'RE WRONG!
Re-doing the parking lot is a capital expense having nothing to do with the tenant space.
True or false: The broker only gets paid if he sells or leases the space he is assigned to sell.
YOU'RE CORRECT!
The broker is paid with a percentage of the money earned from the sale.
YOU'RE WRONG!
The broker is paid with a percentage of the money earned from the sale.
Why is it a bad thing to have higher economic occupancy than physical occupancy?
YOU'RE CORRECT!
Economic occupancy without physical occupancy indicates that a store is still contractually signed to a space meaning you can't lease it to someone else. When there is a big empty space with economic occupancy but not physical occupancy, there is a substantial amount of customers that the large space tenant would be drawing to the shopping center that are being missed.
YOU'RE WRONG!
Economic occupancy without physical occupancy indicates that a store is still contractually signed to a space meaning you can't lease it to someone else. When there is a big empty space with economic occupancy but not physical occupancy, there is a substantial amount of customers that the large space tenant would be drawing to the shopping center that are being missed.
What is a 1031 swap?
YOU'RE CORRECT!
1031 is a section of the tax code referring to specific tax results for certain actions. When someone talks about a 1031 swap, they are simply regarding taking the gains of one property and investing them in another that meets certain criteria identified in section 1031.
YOU'RE WRONG!
1031 is a section of the tax code referring to specific tax results for certain actions. When someone talks about a 1031 swap, they are simply regarding taking the gains of one property and investing them in another that meets certain criteria identified in section 1031.
Why is it not always a good idea to maximize FAR?
YOU'RE CORRECT!
If you build more than there is demand for, you will end up losing revenue from the spaces that are not leased. Sometimes building more than there is demand for pays off in the long run, but it is risky to do so.
YOU'RE WRONG!
If you build more than there is demand for, you will end up losing revenue from the spaces that are not leased. Sometimes building more than there is demand for pays off in the long run, but it is risky to do so.
When money goes hard it is...
YOU'RE CORRECT!
When money goes hard, it means it can no longer be refunded.
YOU'RE WRONG!
When money goes hard, it means it can no longer be refunded.
Typically when people mention spread what are they referring to?
YOU'RE CORRECT!
When referring to real estate spread it typically regards the spread between yield and 10-year Treasury.
YOU'RE WRONG!
When referring to real estate spread it typically regards the spread between yield and 10-year Treasury.
What is the difference between earnings and FFO?
YOU'RE CORRECT!
With real estate, depreciation is high compared to other investments, and it detracts from the earnings too much to include it. AFFO is a similar metric which takes capital expenses into account on top of the ordinary FFO to make it a more ideal investment metric.
YOU'RE WRONG!
With real estate, depreciation is high compared to other investments, and it detracts from the earnings too much to include it. AFFO is a similar metric which takes capital expenses into account on top of the ordinary FFO to make it a more ideal investment metric.
