Lecture+6+FNCE+232+Lease+Analysis

Lecture+6+FNCE+232+Lease+Analysis - FNCE 232 Real Estate...

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FNCE 232 Real Estate Investments Lecture 6 Lease Analysis Professor C. F. Sirmans Office: Room 443 School of Business Office Hours: 2:30 - 3:30 Tu & Th
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Administrative Issues Konover Fieldtrip – Friday, Feb 9 Resumes for Internships and Jobs Real Estate Society Meetings Exam 1 – Thursday, February 8
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Review From Lecture 5 What is the role of market analysis in the investment decision? Do you know how to calculate IRR? Net Present Value? Review carefully Problem Set 2 Any questions or issues, see Teaching Assistants during their office hours
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Forecasting Net Operating Income and Net Sale Price The lecture continues the discussion of how to forecast the Net Operating Income (NOI) and Net Sale Price (NSP) from a potential real estate investment. You should review carefully both the Office Building and Apartment Cases. Can you forecast NOI and NSP for these?
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Overview Basic Concepts associated with Leases Operating Expenses — How to measure/forecast? Leased-fee Value
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Cash Flow From Operation Potential Gross Income - Vacancy and Bad Debts + Miscellaneous Income Effective Gross Income - Operating Expenses PGI - VBD + MI EGI - OE = Net Operating Income = NOI - Debt Service - DS = Before-Tax Cash Flow = BTCF - Taxes from Operation - TAXES = After-Tax Cash Flow = ATCF
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Basic Lease Concepts Leased-fee Value vs. Market Value Mechanics of Leases Legal Issues associated with Leases Lease Clauses (Options)
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Lease Basics Definition: A lease is the document that defines the legal and contractual obligations between the landlord and tenant. Property’s cash flow and value are influenced significantly by the lease. Critical for successful equity and debt investments.
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Tenant’s claim is called the leasehold. Landlord’s (owner) claim is the leased- fee. The “value” of tenant’s claim may be positive or negative, depending on the relationship between lease rent and market rent. Tenant could “sell” the leasehold, for
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Lecture+6+FNCE+232+Lease+Analysis - FNCE 232 Real Estate...

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