chapter 18: Investment Decisions: Ratios Flashcards Preview

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Flashcards in chapter 18: Investment Decisions: Ratios Deck (15)
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1
Q

Net Operating Income equation

A

Potential Gross Income - Vacancy and Collection Loss - operating expenses - capital expenditures

2
Q

cash down payment

A

Acquisition price - Net loan proceeds

3
Q

before tax cash flow

A

NOI - annual debt service
-expected cash flow left over from rental operations each year after paying all operating expenses, capital expenditures and servicing the mortgage debt

4
Q

questions to ask when evaluating cash flow estimates

A

are the sources of income and expenses appropriate?
have the trends for each revenue and expense item been considered?
what about comparable properties?
what are the prevailing social and legal environments?
how is the demand and the supply of properties similar to the subject property likely to change?

5
Q

pro rata share

A

an amount proportionate to the ownership interest of an investor

6
Q

maximum statuatory federal income tax rate

A

35%

7
Q

after tax cash flow

A

the residual claim on the property’s cash flow after the mortgage lenders and the state and federal government have collected their share
NOI - annual debt service - tax liability

8
Q

going-in cap rate

A

NOI/acquisition price

9
Q

equity dividend rate

A

before tax cash flow/equity investment

10
Q

net income multiplier

A

acquisition price/ NOI

11
Q

effective gross income multiplier

A

acquisition price/effective gross income

12
Q

operating expense ratio

A

operating expenses/effective gross income

13
Q

debt coverage ratio

A

NOI/Debt service

14
Q

loan to value ratio

A

mortgage balance/property value

15
Q

debt yield ratio

A

NOI/Loan amount