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What is the MOST important formula in commercial real estate based on what you’ve learned in class so far?
Income - Expenses = Net Operating Income (NOI)
What does leverage refer to in real estate investing?
Using borrowed money (financing) to amplify investment power
You have $100K down payment and are able to obtain a loan for 75% of the purchase price (75% loan-to-value or LTV), meaning you have a 25% down payment due at closing, What price point can you purchase at?
$400,000
What makes real estate different from stocks?
Lending institutions will let you borrow money to purchase real estate
What is the primary concept that Vanessa used to control a large asset with minimal personal investment?
Leverage
What does "PITI" stand for in real estate terminology?
Principal, Interest, Taxes, Insurance
What components of the home should be inspected during the home inspection timeframe?
Roof / Electrical / Sewer line, especially if it is an older home
House hacking provided tax benefits to Vanessa because:
Mortgage interest is tax deductible
What gives the Xcel Energy meter reader the right to enter my yard and read the electric and / or gas meter?
Easement
The owner is responsible for the sewer line all the way to the where it meets up with the sewer main line.
True
What is the relationship between cap rate and risk?
High cap rate = higher risk, Low cap rate = lower risk
What best describes the "value-add" concept in commercial real estate?
Increasing NOI through better leasing, management, or renovations
What happens to property prices when cap rates decrease?
Prices increase
What is the main message in the phrase "Exploit Home Field Advantage" as it is used in real estate investing?
Knowing your area deeply gives you a major edge
Which of the following is an example of a niche market?
Office buildings / Self Storage / Mobile Home Parks
What does "ADU" stand for
Accessory Dwelling Unit
What is a proforma in real estate?
A future-focused estimate showing predicted income, expenses, and returns
What is the recommended minimum Debt Service Coverage Ratio (DSCR) in commercial real estate?
1.25 (Meaning NOI must be minimum 125% of the Annual Debt Service)
In commercial real estate, which of the following are Due Diligence requirements that the buyer is required to order, provide, and/or pay for during the loan process?
Appraisal / Environmental Report / Insurance Binder
From the bank's perspective, a higher down payment % means _______ risk for the bank.
Less
If your NOI is 110% of the Annual Mortgage Payments due on the commercial property you own, what is Debt Service Coverage Ratio (DSCR)?
1.10
During a refinance, what happens to the mortgage that is in place?
The new loan pays off any mortgage that is currently in place
What economic signal typically leads to the Fed maintaining high rates?
Persistent inflation
What is the typical maximum Loan-to-Value (LTV) ratio that commercial lenders rarely exceed?
75%
What do residential mortgage rates primarily respond to, rather than direct Fed actions?
What the Fed says, as this affects things like the the 10-year Treasury yield and mortgage-backed securities
According to Brandon Grebe, what is the #1 risk his company faces with new development projects in the self storage industy?
New inventory from competing developments that threatens occupancy rates and projected lease rates
When Brandon discussed the mountain storage unit portfolio investment opportunity, which protective "moats" did he identify that shield these properties from competition?
Mountain terrain limits available buildable land / High land prices make new projects financially prohibitive / New construction costs require much higher rents to be feasible
. In the Colorado Contract to Buy and Sell Real Estate, the Inspection Objection Deadline, Appraisal Objection Deadline, and Property Insurance Deadline are examples of what?
Contingencies reflected in paragraph 3 of the contract, under which your Earnest Money is refundable
What happens if you find major issues that need to be repaired during the home inspection?
You may submit an Inspection Objection document requesting that the Seller make these repairs prior to closing, prior to the Inspection Objection deadline / You may terminate the contract, prior to the Inspection Termination deadline / You can decide to proceed with the transaction regardless of repairs needed
What happens if, after under contract, you commence formal underwriting with your lender and due to debt you failed to mention earlier, you do not qualify for the loan you thought you qualified for?
You can terminate the contract and retain the Earnest Money prior to the Loan Terms Deadline / You can explore other loan options and strategies, such as getting a co-signor
What does the lender generally require an appraisal?
They are lending a substantial amount of funds and want to protect their investment / The loans they make need to conform to Fannie Mae and Freddie Mac guidelines so they can sell them on the secondary market, and an appraisal is one of the requirements.