Real Estate Final

Front 1

involves estimating the construction cost of a
building and any site improvements, deducting accrued Depreciation, then adding the site value.

Back 1

Cost Approach

Front 2

This approach involves finding at least three recent Sales of
properties comparable to the subject being appraised, and then adjusting the sales for Inferior and Superior factors in an adjustment grid.

Back 2

Sales Comparison Approach

Front 3

for valuing residential properties
involves estimating a gross monthly Rent for the
subject property based on comparable Rentals, then
multiplying that income by a Gross Rent Multiplier
(GRM).

Back 3

Income Approach

Front 4

the
most reliable method is dependent upon the data available and type of
property being appraised.

Back 4

3 Appraisals to valuation

Front 5

1. The uses that are Physically possible.
2. The uses that are Legally Permissable.
• All uses that are physically possible must be investigated to
determine any legal restrictions (zoning, subdivision regulations, historical regulations, etc.) in place.
3. All uses physically possible and legally permissible must be
analyzed to find those that are Financially Feasible.
4. And finally, of those uses considered financially feasible, the most Maximalty Productive use would be the highest and
best use.

Back 5

Highest and Best Use Analysis

Front 6

1. Physical Depreciation
2. Functional Depreciation
3. External Depreciation

Back 6

3 Types of Depreciation

Front 7

A loss in value due to wear and tear of a property (i.e. worn
carpet and paint) is considered to be ________________ and labeled Deferred maintenance.

Calculated by the Age/Life
Method whereby the Effective age is divided by the
Total or Original_ life of the property.

* The effective age may or may not be the same as chronological age. 60 years 15years/60years = 25%

Back 7

Physical depreciation

Front 8

A loss in value due to an Inadequacy_ or Super Adequacy of a property is called

Can be calculated by the Cost to Cure.

INADEQUACIES=7 foot ceilings, 1 bath 3 bedroom

SUPER-ADEQUACIES= (5 car garage, pool, tennis 7 courts, 18 foot ceilings,

Back 8

Functional Depreciation

Front 9

A loss in value due to factors outside of the property’s
boundaries is called

Can be calculated by _Matched Pairs analysis.

Back 9

External Depreciation

Front 10

is found by dividing the sale prices of comparable
rentals by their gross monthly rent at the time of their sale.

Back 10

GRM ( Groos Rent Multiplier)

Front 11

The impact that borrowed funds have on an investment return is
called ________.

The percentage of the investment financed with borrowed funds is
the amount ________.

• The greater the ________ the higher the Risk and
Return.

Back 11

Leverage

Front 12

The annual cash flow divided by the cash down payment (equity)
is called __________ also known as Section on Equity.
Cash Flow Equity = 1,000/20,000= 5%

Back 12

Cash On Cash

Front 13

The annual return or yield based on the four monetary benefits to
investing in real estate is called Total Return also
known as

The total return on equity is a more accurate reflection of the
overall performance of an investment.

Back 13

Total Return on Equity

Front 14

1. Appropriation
2. Assessment
3. The tax rates needed to support the budget of each taxing entity is
determined. ** The tax rates are expressed in dollars per $100 of valuation.

Back 14

3 Steps in Determining Taxe

Front 15

Each tax unit prepares a budget; the process is called ________.

* There are 24 tax jurisdictions in Hays Co; 98 in Travis Co.

Back 15

Appropriation

Front 16

The value of each property in the county is determined by Mass appraisal. The process is called __________.

* The Texas property tax code provides for a Central Appraisal District (CAD) in each county.

* Each taxing district must use the cad’s value to determine property taxes due.

Back 16

Assessment

Front 17

If a property’s use is changed from agricultural (with a special ag. exemption) to a higher, more valuable use, this can result in a

Back 17

Tax Rollback

Front 18

Owners have a TWO year “_____________” if their homesteads or agricultural property is seized and sold at auction.
• During the first year, the owner must pay the Auction price, unpaid taxes and Interest, plus 25 % of the total to the auction purchaser.
• During the second year, the owner must pay the same except 50 % of
the total to the auction purchaser.
• For all other property, the same basis applies except the time frame is 6 months and the amount is 25 % of the total.

Back 18

Right of Redemption

Front 19

True False quiz in notes

Back 19

True False quiz in notes

Front 20

1. Percentage Lease
2. Escalator Lease
3. Graduated Lease
4. Ground Lease
5. Periodic Estate For Years
6. Tenancy at Sufference

Back 20

Different Types of Leases

Front 21

1. Condominium Ownership
2. Co-Operatives
3. Planned Unit Developments (PUDs)
4. Timeshare Ownership

*All types of ownership combine Community living with
Community ownership.

Back 21

4 Types of Ownership

Front 22

Individual ownership of a space of air plus undivided ownership of the common elements defines

Back 22

Condominium Ownership

Front 23

The type of ownership whereby land and building are owned by a
corporation which leases space to its shareholders is called a

Back 23

Co- Operatives

Front 24

Individually owned lots and houses with community ownership of common areas (HOA Subdivisions) defines

Back 24

Planned Unit Developments (PUDs)

Front 25

ownership defines the exclusive use of a property for a specified number of days each year.

Back 25

Timeshare Ownership

Front 26

is a method used to convert an estimate of

One Year only of income into a value indication.
• The conversion is accomplished by dividing the income estimate by an
appropriate Capitalization (aka overall rate R.) rate.

Back 26

Direct Capitalization

Front 27

2 or More Years of net income are discounted back to
present value to arrive at a value of the investment.

Uses IRR= Reversion

2. Discount Rate: The rate that is applied to the annual cash flows in order to convert them to Present value. Also known as the Internal Rate of Return (IRR).

Back 27

Discounted Cash Flow (DCF)

Front 28

The investor relies upon a projected income/expense statement aka Operating Statement or

Back 28

Pro-Forma

Front 29

1. Estate for Years
2. Periodic Estate
3. Tenancy At Sufferance

Back 29

3 main types of leasehold estates

Front 30

A lease that is for a definite period of time and has no automatic renewal at
the end of lease is called an

Back 30

Estate For Years

Front 31

A lease that is for a definite period of time and does have an automatic renewal clause at the end of lease that leads to a month to month lease is called a

* Most common type of lease

Back 31

Periodic Estate

Front 32

A holdover tenancy without the lessor’s consent is called a
A lease for less than one year can be oral in Texas.

Back 32

Tenancy At Sufferance

Front 33

A lease whereby the tenant pays rent and utilities only is called?

Primarily Residential

Back 33

Gross Lease

Front 34

A lease whereby the tenant pays rent and utilities plus either property taxes
or hazard insurance or maintenance of the unit is called a

Back 34

Net Lease

Front 35

A lease whereby the tenant pays rent, utilities, taxes, insurance and maintenance is called a

Back 35

Triple Net Lease (Common) (NNN).

Front 36

A lease that calls for slight increases in rent each period (usually annually) is called a

Back 36

Graduated Lease

Front 37

A lease of vacant land that typically involves a long period of time (25 to 99 years) is called?


* The leasee owns the improvements until the end of the lease, at which time the
ownership of the improvements reverts to the leasor.
Examples: sports stadiums and hotels

Back 37

Ground Lease

Front 38

A lease whereby the monthly rent is tied to the amount of sales generated by
the tenant is called?

* This type of lease is common among retail tenants in large shopping malls.

Back 38

Percentage Lease

Front 39

BLUE NOTES

Back 39

BLUE NOTES

Front 40

The total transfer of the tenant's rights to a third party is called?
* The transfer involves an assignor and assignee.
* The assignor remains liable for the performance of the lease.

Back 40

Assignment

Front 41

A partial transfer of the tenant’s rights to a third party is called?

* The transfer involves a sub-lessor (original tenant) and sub-lessee.
* Typically the sub-lessee pays the sub-lessor who pays the landlord.
Example: You rent a home and then sub-lease on of the bedrooms to your friend.

Back 41

Subletting

Front 42

The process of converting income to a value estimate is called

Back 42

Capitalization

Front 43

1. Social Forces
2. Economic Forces
3. Government Regulations
4. Environmental Forces

Back 43

4 forces that Influence Value

Front 44

An area’s demographics including population growth, population age, family size, etc.

* Example: retirement community values should continue to increase as
the general population ages.

Back 44

Social Forces

Front 45

Current and anticipated supply and demand of real estate, and thus value, is influenced by __________.

Examples:
A. Purchasing, power of the population
B. Wage Levels
C. Construction Costs
D. Labor Costs

Back 45

Economic Forces

Front 46

Laws and regulations affecting the use of real estate, and thus,
value are ___________.

Examples:
A. Police and Fire Protection
B. Zoning and Building Codes
C. Aquifer Regulations
D. County and City Subdivision Rules
E. Water Related Regulations

Back 46

Government Regulations

Front 47

Factors that are both natural and man-made that affect values are
called ___________.

Examples:
A. Terrain and Soils
B. Rivers and Lakes
C. Hillviews
D. Highway Systems

Back 47

Environmental Forces

Front 48

1. Principle of Supply and Demand
2. Principal of Anticipation
3. Principal of Substitution
4. Principal of Conformity

Back 48

4 Main Appraisal Principles

Front 49

The Principle of ___________ stipulates that supply always responds to demand.
• “Competition always flows to Excess/Profits”.

• There is never a true
equilibrium of real estate supply and demand due to the fact that real estate is an Ineffecient market.

Back 49

Principal of Supply and Demand

Front 50

The principle that states "value is created by the expectation of
future benefits" is called the Principle of __________.

• With residential real estate, the expectations are all of the benefits of home ownership:
* Shelter
* Building Equity, “Pride of Ownership”

Back 50

Principal of Anticipation

Front 51

The appraisal principle that states “everything else being equal, the property with the lowest price will attract the greatest demand” is the Principle of _________.

• “No one will pay more for a property than An Equal Substitute or the Cost to Build.
an equal substitute given no undue delays”.

Back 51

Principal of Substitution

Front 52

The principle that states "value is maximized when it conforms to surrounding property" is called the Principle of _______.

• You should never try to have the Most expensive house in the
neighborhood.
• Don’t overbuild!

Back 52

Principal of Conformity

Front 53

is the process of assigning a weight or amount of importance to each sale in order to arrive at a final value.

Back 53

Reconciliation