2015 Fl Re Exam Prep Vocab 06

Front 1

Operating expenses

Back 1

Cash outlays necessary to operate and maintain a property. Examples of operating expenses include real estate taxes, property insurance, property management and maintenance expenses, utilities, and legal or accounting expenses. Operating expenses do not include capital expenditures, debt service, or cost recovery.

Front 2

Opportunity cost

Back 2

The cost of selecting one alternative is the benefit foregone from the next best alternative. Also see discount rate.

Front 3

Original basis

Back 3

The total amount paid for a property, including equity capital and the amount of debt incurred.

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Out-migration

Back 4

The process by which a given geographic area expels or loses individuals/households to locations outside that area (an outflux of individuals/households from a given area).

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Outlet center

Back 5

A retail property type usually located in rural or occasionally in tourist locations, outlet centers consist mostly of manufacturers’ outlet stores selling their own brands at a discount. These centers are typically not anchored. A strip configuration is most common, although some are enclosed malls, and others can be arranged in a village cluster.

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Oversupply

Back 6

In reference to commercial real estate, oversupply is a stock or supply of a given commercial property type that is greater than that which can be cleared under prevailing prices levels and market conditions (for example, excess supply). Also, a phase of the real estate market cycle denoting that period of time in which commercial real estate markets become saturated with units due to overbuilding.

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Owning

Back 7

A means of obtaining the full economic use of a property for an unspecified period by obtaining an ownership interest.

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Partially amortized mortgage loan

Back 8

The payments do not repay the loan over its term and thus a lump sum (balloon) is required to repay the loan.

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Participation mortgage

Back 9

A loan secured by real property, with a stated interest rate that also provides for a share to the lender in annual net cash flow, gain on sale, or proceeds from refinancing the property.

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Passive income

Back 10

Income from rental activity, limited business interests, or other activities in which the investor does not materially participate.

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Passive losses

Back 11

Losses from the ownership of passive investments.

Front 12

Payment (PMT)

Back 12

A periodic amount paid or received for two or more periods.

Front 13

Percentage lease

Back 13

A lease in which the rent amount is based on a percentage of gross sales (monthly or annually) made by the tenant.

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Percentage rent

Back 14

The additional rent (over a base amount) that is paid by tenants to owners on tenant sales over a specified dollar amount. It is frequently found in retail leases. Also known as overage rent.

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Perfect market

Back 15

A market in which the products are homogenous, there is complete information, and no buyers or sellers may influence the market.

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Physical depreciation or deterioration

Back 16

A form or source of accrued depreciation considered in the cost approach to market value. The physical decay or deterioration of a property that may result from breakage, deferred maintenance, effects of age on construction material, and normal wear and tear.

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Physical limitations

Back 17

Limitations imposed by the physical size, shape, or characteristics of a property or its level of development.

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Pipeline information

Back 18

Information (substantiated and rumored) regarding new inventory that is in the process of being added to the market by a specified forecast period.

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Planned additional inventory

Back 19

In reference to commercial real estate, it is the supply or stock of a specific type of commercial unit or the amount of space that will be available in an upcoming forecast period from expansions, conversions (in), and new construction.

Front 20

Planned removed inventory

Back 20

In reference to commercial real estate, it is the supply or stock of a specific type of commercial unit or the amount of space that will not be available in an upcoming forecast period due to demolitions and conversions (out).

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Population/expenditure approach

Back 21

An approach to estimating the trade area (and sales/revenue potential) for a given retail establishment or center based on the minimum area (or threshold population) that would be required to sustain a business, by calculating the population necessary to support total square footage of both existing and proposed space for a specific-use and determining/mapping the extent of the trade area based on population density.

Front 22

Population growth

Back 22

The rate at which a given population base in a given geographic area is growing (positive or negative) in relation to the forces of internal growth, in-migration, and out-migration; a factor that is widely acknowledged as having the greatest impact on the demand for housing.

Front 23

Population migration

Back 23

The movement and relocation of people from one place of residence to another in response to social and economic factors and forces; a long-term trend that can be expected to affect local economies and real estate values.

Front 24

Portfolio income

Back 24

Income from interest, dividends, royalties, or the disposition of property held for investment.

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Positive leverage

Back 25

Borrowed funds are invested at a rate of return higher than the cost of the funds to the borrower.

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Potential rental income

Back 26

The total amount of rental income for a property if it were 100 percent occupied and rented at competitive market rates.

Front 27

Power center

Back 27

This retail center is dominated by several large anchors, including discount department stores, off-price stores, warehouse clubs, or category killers—stores that offer tremendous selection in a particular merchandise category at low prices. The center typically consists of several freestanding (unconnected) anchors and only a minimum amount of small specialty tenants.

Front 28

Present value (PV)

Back 28

The sum of all future benefits or costs accruing to the owner of an asset when such benefits or costs are discounted to the present by an appropriate discount rate.

Front 29

Present value method

Back 29

A comparison technique that compares the present values of the cash flows for any two real estate alternatives. The best user alternative is based on the lower present value amount. It is not the same as net present value.

Front 30

Prestige and property classes

Back 30

In reference to the recognition that various levels of status may be assigned to commercial properties as defined by user needs, the quality of a property and its amenities in relation to site factors, and its general location, suggesting the division of properties into distinct classes.

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Price

Back 31

The dollar amount that was offered, asked, or actually paid for a property.

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Primary source data

Back 32

Information obtained directly from field observations and survey instruments (by observing or monitoring a phenomenon or site firsthand), typically involving quantitative measurement and/or qualitative assessment of that which is observed or monitored.

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Principal

Back 33

The portion of a loan payment used toward reducing the original loan amount.

Front 34

Probabilities and expected value

Back 34

A quantifiable method of risk analysis. This method assigns probabilities to specific, possible investment outcomes, calculates an expected outcome for the investment based on these probabilities, and measures the likelihood that actual results will differ from the expected 
outcome. This method of risk analysis can be applied directly to real estate investments. It also can be used in conjunction with the forecasts generated through sensitivity analyses. This technique requires that probabilities be assigned to possible outcomes. Probabilities on the best-case, most-likely, and worst-case scenarios can be assigned to the resulting expected values for the return. Variances also can be computed using the assigned probabilities.

Front 35

Production

Back 35

Any economic activity that alters, enhances, or transforms a product or material, thereby increasing the value of that product or material by changing its physical form and/or location.

Front 36

Property data

Back 36

Property/site-specific information obtained from primary and secondary sources.

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Property market

Back 37

The supply and demand for ownership interests in property.

Front 38

Property-specific factors

Back 38

Property-specific factors Factors influenced by the site-specific and technical characteristics of a property or parcel including its layout, limitations, orientation, physical features, and ability to comply with government imposed zoning and land-use restrictions.

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Property type

Back 39

The classification of commercial real estate based on its primary use. The four primary property types are: retail, industrial, office, and multi-family residential.

Front 40

Proprietary data

Back 40

Information obtained (usually at a cost) from private sources or firms that hold the exclusive rights to manufacture and distribute information created for specific commercial applications, supplying business, sales, and market-potential data and other information services to a targeted audience.

Front 41

Purchasing power risk

Back 41

The variability in the future purchasing power of income received from an investment.

Front 42

Qualify

Back 42

First stage of four-stage transaction management process pertaining to the process of gathering and evaluating information to measure a client’s readiness, willingness, and ability to consummate a transaction. The acronym QUALIFY represents the considerations of quantify, usage, authority, latitude, intention, financial, and yield involved in the qualify stage.

Front 43

Quality of life

Back 43

The psychological and individual aspects of social well-being as perceived and experienced by people in reference to a given geographic area, which reflect a state of mind or position on the prevailing quality of existence in relation to various socio-economic and environmental conditions and/or amenities known to be associated or found within that area.

Front 44

Range

Back 44

The maximum distance consumers are willing to travel to purchase a good or service from a given establishment or location. Hence, the boundary or outer limits of the market area circumscribed about a location at which a good or service may be purchased can be easily identified having knowledge of the range.

Front 45

Rate of return

Back 45

The percentage return on each dollar invested. Also known as yield.

Front 46

Real estate cycles (phases)

Back 46

The regularly repeating sequence of economic downturns and upturns and associated changes in real estate market transactions tied to market dynamics and changing macro- economic conditions, whose phases include (in order) recession, recovery, expansion, and oversupply.

Front 47

Real estate fluctuations

Back 47

Short-term variations in real estate prices or rents (usually lasting anywhere from one day to a few months) caused by natural hazards (such as tornadoes, hurricanes, floods, earthquakes, and wildfires) or boosts or shocks to the local economy (such as the entry or exit of major employers).

Front 48

Real estate investment trust (REIT)

Back 48

An investment vehicle in which investors purchase certificates of ownership in the trust, which in turn invests the money in real property and then distributes any profits to the investors. The trust is not subject to corporate income tax as long as it complies with the tax requirements for a REIT. Shareholders must include their share of the REIT’s income in their personal tax returns.

Front 49

Real estate trends

Back 49

Long-term movements or tendencies in the demand for commercial real estate (which can typically last for years or decades), usually tied to macro-economic or business cycles.

Front 50

Recession

Back 50

A period of reduced economic activity or a general economic downturn marked by a decline in employment, production, sales, profits, and weak economic growth that is not as severe or prolonged as a depression. As a result, sales in real estate markets are slow, property values and price levels are flat or decreasing, and there is virtually no construction of new stock given excess supply of units in most real estate markets.