Humber Real Estate Course 4 Exam Prep. Questions And Answers Rated A+

Additional Rent - -rent owed by the tenant in addition to the base rent -represents the tenant's proportionate share of operating costs -estimated at beginning of any fiscal year -tenant paying equal monthly installments in advance throughout period Base Rent - -minimum rent -basic rent payable by the tenant under a lease -defined in the lease -incremental increases in annual base rent may be defined in the agreement -periodic rental escalations Buyer Needs - Commercial Property - -location -workforce availability -transportation routes -parking -utilities and other services -affordability -finances and the salesperson -business plans Buyers - Income Streams and Risks - -gather relevent documents on key income streams if buyer is an investor -gather information on tenant risks, building condition risks and economic condition risks (geowarehouse and economic development offices) Calculating Investment Returns - -value estimated by dividing NOI by the cap rate-NOI is income derived from all sources minus the expenses incurred to generate that income -cap rate is the initial return from the acquisition of a real asset; dividing NOI by the sale price (value), first year of ownership Calculating Investment Returns - to estimate value: NOI divided by Rate = Value to estimate NOI: Value x Rate = Income to estimate Cap Rate: NOI divided by Value = Rate Commercial Investment Returns - -yield realized on an investment -expressed as a percentage, can be positive or negative -higher the risk (cost) higher the return Due Diligence - Commercial Showings - -limitations and title related matters -tenancy -zoning -sewer systems and water supply -condition of buildings, systems and water supply -environmental considerations -special municipal tax assessments ESA Review and Due Diligence - -up-to-date ESA -third-party recommendation to review Free-Standing Offices - -showcase a company's individuality in a given area-free of added maintenance fees, bylaws and regulations associated w/ condos -could be better investment as capital appreciation may be greater Gathering Key Material Facts - Buyers - -legal standing -existing leases and the property's compliance w/ them -any registrations on title -mortgages, liens, easements and other encumbrances registered against the property -environmental hazards, if any -financial/operational concerns -structural issues and overall property conditions General Spatial Considerations - -easily distinguished as inappropriate for certain uses -others will require a more critical perspective Ideal Tenant Mixes - -cater to the needs of the customers within the trading area -develop customer traffic in the shopping center -encourage customers to stay longer in the center while shopping -provide stores that complement each other Income Stream - -determined by verifying income derived from leases or other types of contracts -due diligence: focus on the financial health of the business -length of time remaining on existing leases/contracts -opportunities for renewals -rent/revenue escalations in the contracts