Chapter 5 Flashcards
The starting point for forecasting the stream of benefits that will flow from a rental property is to…
reconstruct the operating history.
The starting point for forecasting the stream of benefits that will flow from a rental property is to reconstruct the operating history.
Past trends are projected into the future, with revisions to reflect perceived changes in the economic, political, and social environment that are likely to affect the property’s ability to generate future benefits.
All benefits are expressed…
on an after-tax cash-flow basis
A typical operating statement starts with an expression of…
the gross rent the property would generate if fully rented.
A typical ______ starts with an expression of the gross rent the property would generate if fully rented.
operating statement
A typical operating statement starts with an expression of the gross rent the property would generate if fully rented.
This is adjusted for…
Further adjustments for…
vacancies and rent losses, plus revenue from sources other than rent, to arrive at effective gross revenue.
• Subtracting operating expenses from the effective gross revenue yields net operating income
• Further adjustments, for financing costs, income taxes, and other nonoperating cash flows, yield an estimate of net cash flow to the equity investor.
Sources of information regarding rental revenue and operating expenses include…
- the past operating history of the property itself,
- the operating records of comparable properties, and
- data from published sources.
• The last source provides benchmarks against which to gauge the reasonableness of conclusions.