**Question xxxxxxx style="margin-left:-36.0pt;"> How xxxxxxx the use xxxxxxx xxxxxxx shift xxxxxxx risk from xxxxxxx to the xxxxxxx style="margin-left:-36.0pt;"> xxxxxxx xxxxxxx how much xxxxxxx will be xxxxxxx by the xxxxxxx versus the xxxxxxx Future increases xxxxxxx market rent xxxxxxx xxxxxxx compensated xxxxxxx by including xxxxxxx inflationary adjustment, xxxxxxx as xxxxxxx xxxxxxx adjustment. In xxxxxxx case of xxxxxxx CPI xxxxxxx the risk xxxxxxx shifted to xxxxxxx lessee, because xxxxxxx xxxxxxx in xxxxxxx is not xxxxxxx in advance. xxxxxxx the xxxxxxx xxxxxxx responsible xxxxxxx any unexpected xxxxxxx in the xxxxxxx of inflation, xxxxxxx lessor is xxxxxxx that the xxxxxxx xxxxxxx of xxxxxxx lease xxxxxxx be preserved. xxxxxxx lessor xxxxxxx xxxxxxx additional risk xxxxxxx the lessee xxxxxxx including net xxxxxxx or expense xxxxxxx provisions xxxxxxx the lease. xxxxxxx xxxxxxx important xxxxxxx note, however, xxxxxxx we would xxxxxxx the xxxxxxx xxxxxxx accept a xxxxxxx base rent xxxxxxx the burden xxxxxxx risk is xxxxxxx to the xxxxxxx style="margin-left:-36.0pt;"> **

**Question xxxxxxx xxxxxxx What xxxxxxx the difference xxxxxxx face rents xxxxxxx effective xxxxxxx xxxxxxx Face rents, xxxxxxx called asking xxxxxxx are the xxxxxxx rates which xxxxxxx quote to xxxxxxx tenants. These xxxxxxx xxxxxxx not xxxxxxx reflect any xxxxxxx abatements, or xxxxxxx and, xxxxxxx xxxxxxx lessor is xxxxxxx to maintain xxxxxxx and xxxxxxx asking rates xxxxxxx time. Effective xxxxxxx on the xxxxxxx xxxxxxx considers xxxxxxx large number xxxxxxx possible xxxxxxx of xxxxxxx xxxxxxx and more xxxxxxx reflects rental xxxxxxx overtime. Effective xxxxxxx is derived xxxxxxx calculating xxxxxxx present value xxxxxxx xxxxxxx expected xxxxxxx rental stream, xxxxxxx using this xxxxxxx to xxxxxxx xxxxxxx equivalent level xxxxxxx annuity over xxxxxxx term of xxxxxxx lease. As xxxxxxx single measure xxxxxxx net income xxxxxxx xxxxxxx effective xxxxxxx makes the xxxxxxx comparison of xxxxxxx alternatives xxxxxxx xxxxxxx style="margin-left:-36.0pt;"> What xxxxxxx the economic xxxxxxx for the xxxxxxx approach? Under xxxxxxx conditions would xxxxxxx cost approach xxxxxxx xxxxxxx xxxxxxx the best xxxxxxx estimate?**

xxxxxxx rationale xxxxxxx xxxxxxx the cost xxxxxxx to valuing xxxxxxx properties is xxxxxxx any informed xxxxxxx of real xxxxxxx estate would xxxxxxx xxxxxxx more xxxxxxx a property xxxxxxx what it xxxxxxx cost xxxxxxx xxxxxxx the land xxxxxxx build the xxxxxxx style="margin-left:-36.0pt;"> The xxxxxxx approach is xxxxxxx reliable where xxxxxxx structure is xxxxxxx xxxxxxx and xxxxxxx does not xxxxxxx serious xxxxxxx style="margin-left:-36.0pt;">

*What is xxxxxxx economic rationale xxxxxxx the sales xxxxxxx approach? What xxxxxxx is necessary xxxxxxx use this xxxxxxx xxxxxxx does xxxxxxx mean for xxxxxxx property to xxxxxxx comparable?*

The xxxxxxx comparison approach xxxxxxx valuation is xxxxxxx xxxxxxx data xxxxxxx from recent xxxxxxx of properties xxxxxxx xxxxxxx xxxxxxx the property xxxxxxx appraised.

xxxxxxx a property xxxxxxx be comparable, xxxxxxx sale must xxxxxxx an “arm’s-length” xxxxxxx xxxxxxx a xxxxxxx between unrelated xxxxxxx individuals. Sales xxxxxxx represent xxxxxxx xxxxxxx transactions with xxxxxxx unusual circumstances, xxxxxxx as xxxxxxx sales involving xxxxxxx entities, and xxxxxxx on.

**Question xxxxxxx xxxxxxx What xxxxxxx a capitalization xxxxxxx What are xxxxxxx different xxxxxxx xxxxxxx arriving at xxxxxxx overall rate xxxxxxx use for xxxxxxx appraisal?**

xxxxxxx overall rate xxxxxxx overall capitalization xxxxxxx xxxxxxx the xxxxxxx on the xxxxxxx property (debt xxxxxxx equity).

xxxxxxx investors buy xxxxxxx based on xxxxxxx future benefits, xxxxxxx is the xxxxxxx xxxxxxx appraising xxxxxxx property xxxxxxx making any xxxxxxx or xxxxxxx xxxxxxx projections?

xxxxxxx the direct xxxxxxx approach, this xxxxxxx is a xxxxxxx simple approach xxxxxxx the valuation xxxxxxx xxxxxxx xxxxxxx property. The xxxxxxx is based xxxxxxx the xxxxxxx xxxxxxx at any xxxxxxx point in xxxxxxx the current xxxxxxx produced xxxxxxx a property xxxxxxx related to xxxxxxx xxxxxxx market xxxxxxx style="margin-left:-36.0pt;"> Using xxxxxxx band of xxxxxxx approach, xxxxxxx xxxxxxx of value xxxxxxx this approach xxxxxxx based on xxxxxxx cash yields xxxxxxx prevailing in xxxxxxx marketplace. This xxxxxxx xxxxxxx not xxxxxxx to provide xxxxxxx with estimates xxxxxxx long xxxxxxx xxxxxxx of xxxxxxx on equity xxxxxxx Rather, these xxxxxxx yields are xxxxxxx to serve xxxxxxx market benchmarks xxxxxxx xxxxxxx xxxxxxx used in xxxxxxx property values.

**Question xxxxxxx style="margin-left:-36.0pt;"> What xxxxxxx the relationship xxxxxxx a discount xxxxxxx and a xxxxxxx xxxxxxx style="margin-left:-36.0pt;"> xxxxxxx capitalization rate xxxxxxx equal to xxxxxxx difference xxxxxxx xxxxxxx discount rate xxxxxxx the expected xxxxxxx in income. xxxxxxx other xxxxxxx the change xxxxxxx income over xxxxxxx xxxxxxx life xxxxxxx the property xxxxxxx ignored when xxxxxxx a xxxxxxx xxxxxxx rate.**

* xxxxxxx is meant xxxxxxx a unit xxxxxxx comparison? Why xxxxxxx it important?*

**Question xxxxxxx style="margin-left:-36.0pt;"> Why xxxxxxx you xxxxxxx xxxxxxx usually use xxxxxxx different approaches xxxxxxx estimating value?**

**Question xxxxxxx style="margin-left:-36.0pt;"> Under xxxxxxx xxxxxxx should xxxxxxx be explicitly xxxxxxx when estimating xxxxxxx value xxxxxxx xxxxxxx property?**

xxxxxxx should be xxxxxxx considered when xxxxxxx the mortgage-equity xxxxxxx method. With xxxxxxx method, xxxxxxx xxxxxxx of xxxxxxx property can xxxxxxx estimated by xxxxxxx taking xxxxxxx xxxxxxx the requirements xxxxxxx the mortgage xxxxxxx and equity xxxxxxx hence the xxxxxxx “mortgage-equity capitalization”.

**Question 10-9**

xxxxxxx xxxxxxx three categories xxxxxxx depreciation for xxxxxxx cost approach. xxxxxxx are very xxxxxxx to determine xxxxxxx in many xxxxxxx xxxxxxx the xxxxxxx of appraisers xxxxxxx specialize in xxxxxxx problems. xxxxxxx xxxxxxx categories are xxxxxxx follows:

xxxxxxx deterioration.

xxxxxxx or structural xxxxxxx due to xxxxxxx availability of xxxxxxx xxxxxxx layout xxxxxxx and technological xxxxxxx changes that xxxxxxx operating xxxxxxx xxxxxxx External obsolescence xxxxxxx may result xxxxxxx changes outside xxxxxxx the property xxxxxxx as excessive xxxxxxx noise, or xxxxxxx xxxxxxx style="margin-left:-36.0pt;">

*When xxxxxxx a "terminal" xxxxxxx rate xxxxxxx xxxxxxx than a xxxxxxx in" cap xxxxxxx When may xxxxxxx be higher?*

xxxxxxx terminal cap xxxxxxx may be xxxxxxx xxxxxxx the xxxxxxx in cap xxxxxxx if between xxxxxxx present xxxxxxx xxxxxxx end of xxxxxxx holding period xxxxxxx rates are xxxxxxx to fall, xxxxxxx is expected xxxxxxx decline, or xxxxxxx xxxxxxx expected xxxxxxx increase (thereby xxxxxxx higher rents xxxxxxx appreciation). xxxxxxx xxxxxxx terminal cap xxxxxxx would result xxxxxxx the opposite xxxxxxx in the xxxxxxx situations stated xxxxxxx occurred.

**Question xxxxxxx xxxxxxx general, xxxxxxx effect would xxxxxxx reduction in xxxxxxx have xxxxxxx xxxxxxx in" cap xxxxxxx What would xxxxxxx effect have xxxxxxx it occurred xxxxxxx the same xxxxxxx as an xxxxxxx xxxxxxx in xxxxxxx What would xxxxxxx the effect xxxxxxx property xxxxxxx xxxxxxx reduction in xxxxxxx lowers xxxxxxx rates because xxxxxxx returns are xxxxxxx If this xxxxxxx at a xxxxxxx xxxxxxx demand xxxxxxx property values xxxxxxx rise significantly xxxxxxx of xxxxxxx xxxxxxx rents from xxxxxxx demand and xxxxxxx cap rates.**

**Question xxxxxxx are some xxxxxxx the potential xxxxxxx with using xxxxxxx xxxxxxx in" xxxxxxx rate that xxxxxxx obtained from xxxxxxx property xxxxxxx xxxxxxx to value xxxxxxx property being xxxxxxx for sale xxxxxxx occur if xxxxxxx being used xxxxxxx "comparables" have xxxxxxx xxxxxxx terms, xxxxxxx and credit xxxxxxx of tenants. xxxxxxx if xxxxxxx xxxxxxx older, have xxxxxxx have different xxxxxxx design, etc. xxxxxxx the subject, xxxxxxx can occur. xxxxxxx these cases xxxxxxx xxxxxxx must xxxxxxx either adjusted xxxxxxx reflect these xxxxxxx or xxxxxxx xxxxxxx at all.**

**Question xxxxxxx When estimating xxxxxxx reversion value xxxxxxx the year xxxxxxx sale, why xxxxxxx the terminal xxxxxxx xxxxxxx applied xxxxxxx the NOI xxxxxxx the year xxxxxxx the xxxxxxx xxxxxxx Because the xxxxxxx first year xxxxxxx NOI from xxxxxxx investment is xxxxxxx year after xxxxxxx sale.**

**Question 10-14**

xxxxxxx xxxxxxx cap xxxxxxx the same xxxxxxx an IRR? xxxxxxx is xxxxxxx xxxxxxx Why?

** No, xxxxxxx cap rate xxxxxxx the relationship xxxxxxx NOI and xxxxxxx value. The xxxxxxx is the xxxxxxx xxxxxxx all xxxxxxx flows from xxxxxxx and sale xxxxxxx the xxxxxxx xxxxxxx the IRR xxxxxxx greater than xxxxxxx cap rate xxxxxxx to the xxxxxxx that the xxxxxxx value typically xxxxxxx xxxxxxx than xxxxxxx original purchase xxxxxxx 10-15**

Discuss xxxxxxx differences xxxxxxx xxxxxxx (1) a xxxxxxx cap rate xxxxxxx (2) an xxxxxxx rate in xxxxxxx value when xxxxxxx reversion values.

** xxxxxxx xxxxxxx cap xxxxxxx approach is xxxxxxx on the xxxxxxx that xxxxxxx xxxxxxx year of xxxxxxx the investors xxxxxxx value the xxxxxxx based on xxxxxxx new “going xxxxxxx cap rate xxxxxxx xxxxxxx time. xxxxxxx of the xxxxxxx cap rate xxxxxxx based xxxxxxx xxxxxxx the current xxxxxxx going in xxxxxxx rate by xxxxxxx that is xxxxxxx to occur xxxxxxx the holding xxxxxxx xxxxxxx rates xxxxxxx appreciation to xxxxxxx reversion value xxxxxxx based xxxxxxx xxxxxxx expectations as xxxxxxx trends in xxxxxxx values. This xxxxxxx reflect risk, xxxxxxx cash flows, xxxxxxx rates or xxxxxxx xxxxxxx other xxxxxxx 11-1**

*What xxxxxxx the primary xxxxxxx of xxxxxxx xxxxxxx real estate xxxxxxx property?*

__Net xxxxxxx Dollars left xxxxxxx after collecting xxxxxxx and paying xxxxxxx but before xxxxxxx xxxxxxx and xxxxxxx costs.__

__ xxxxxxx Sale:__ Expecting xxxxxxx price xxxxxxx xxxxxxx a specified xxxxxxx period increases xxxxxxx return.

__Diversification:__ xxxxxxx overall risk xxxxxxx hold many xxxxxxx of investments.

xxxxxxx xxxxxxx tax xxxxxxx Taxable income xxxxxxx often less xxxxxxx before-tax xxxxxxx xxxxxxx 11-2

*What xxxxxxx affect a xxxxxxx projected NOI?*

xxxxxxx market rents xxxxxxx vacancy rates

xxxxxxx associated with xxxxxxx xxxxxxx property

xxxxxxx of any xxxxxxx on the xxxxxxx 11-3

* xxxxxxx xxxxxxx would result xxxxxxx a property xxxxxxx in value xxxxxxx a holding xxxxxxx Inflation: This xxxxxxx rents as xxxxxxx xxxxxxx the xxxxxxx sale price xxxxxxx be higher.*

xxxxxxx Increased xxxxxxx xxxxxxx space may xxxxxxx value if xxxxxxx supply of xxxxxxx doesn’t increase xxxxxxx well.

**Question 11-4**

* xxxxxxx do you xxxxxxx xxxxxxx stops xxxxxxx CPI adjustments xxxxxxx leases affect xxxxxxx riskiness xxxxxxx xxxxxxx lease from xxxxxxx lessor’s xxxxxxx of view?*

xxxxxxx is less xxxxxxx for the xxxxxxx with expense xxxxxxx xxxxxxx CPI xxxxxxx in leases.

xxxxxxx Adjustments: The xxxxxxx of xxxxxxx xxxxxxx is shifted xxxxxxx the lessee.

xxxxxxx Stops: The xxxxxxx of increases xxxxxxx expenses is xxxxxxx to the xxxxxxx xxxxxxx allowing xxxxxxx lessor to xxxxxxx the benefit xxxxxxx any xxxxxxx xxxxxxx expenses.

**Question 11-5**

* xxxxxxx should investors xxxxxxx concerned about xxxxxxx rents if xxxxxxx are purchasing xxxxxxx property subject xxxxxxx xxxxxxx Even xxxxxxx the investment xxxxxxx an existing xxxxxxx that xxxxxxx xxxxxxx been leased, xxxxxxx income can xxxxxxx affected when xxxxxxx existing leases xxxxxxx and are xxxxxxx at the xxxxxxx xxxxxxx at xxxxxxx time.*

**Question 11-6**

* xxxxxxx is meant xxxxxxx equity?*

The xxxxxxx xxxxxxx equity in xxxxxxx project is xxxxxxx to the xxxxxxx price less xxxxxxx amount borrowed. xxxxxxx amount of xxxxxxx xxxxxxx investor xxxxxxx in a xxxxxxx may change xxxxxxx time xxxxxxx xxxxxxx property value xxxxxxx loan balance xxxxxxx E.g., if xxxxxxx property value xxxxxxx and the xxxxxxx balance is xxxxxxx xxxxxxx amortization, xxxxxxx investor’s equity xxxxxxx 11-7

*What xxxxxxx the xxxxxxx xxxxxxx differences between xxxxxxx overall rate xxxxxxx an equity xxxxxxx rate?*

Difference: xxxxxxx overall rate xxxxxxx the entire xxxxxxx xxxxxxx the xxxxxxx of the xxxxxxx The equity xxxxxxx rate xxxxxxx xxxxxxx the BTCF xxxxxxx equity dividend) xxxxxxx the first xxxxxxx to the xxxxxxx equity investment.

Similarity: xxxxxxx one of xxxxxxx xxxxxxx a xxxxxxx of investment xxxxxxx because they xxxxxxx not xxxxxxx xxxxxxx account future xxxxxxx from operations xxxxxxx resale of xxxxxxx property at xxxxxxx end of xxxxxxx holding period. xxxxxxx xxxxxxx based xxxxxxx a single xxxxxxx usually the xxxxxxx year.

**Question xxxxxxx xxxxxxx is the xxxxxxx of a xxxxxxx coverage ratio?**

** xxxxxxx is a xxxxxxx of the xxxxxxx to the xxxxxxx xxxxxxx that xxxxxxx the riskiness xxxxxxx a loan. xxxxxxx is xxxxxxx xxxxxxx to which xxxxxxx NOI from xxxxxxx property is xxxxxxx to exceed xxxxxxx mortgage payment. xxxxxxx typically want xxxxxxx xxxxxxx coverage xxxxxxx (DCR) to xxxxxxx at least xxxxxxx 11-9**

xxxxxxx xxxxxxx meant by xxxxxxx shelter?

The term xxxxxxx shelter” refers xxxxxxx an investment xxxxxxx allows a xxxxxxx to reduce xxxxxxx xxxxxxx Although xxxxxxx of the xxxxxxx shelter benefits xxxxxxx real xxxxxxx xxxxxxx removed by xxxxxxx Tax Reform xxxxxxx of 1986, xxxxxxx deductions still xxxxxxx some “shelter” xxxxxxx that they xxxxxxx xxxxxxx deductions xxxxxxx reduce taxable xxxxxxx Interest deductions xxxxxxx the xxxxxxx xxxxxxx serve to xxxxxxx and in xxxxxxx sense shelter xxxxxxx income.

**Question 11-10**

xxxxxxx is the xxxxxxx from the xxxxxxx xxxxxxx real xxxxxxx taxed?

The xxxxxxx taxable gain xxxxxxx the xxxxxxx xxxxxxx real estate xxxxxxx taxed at xxxxxxx same rate xxxxxxx ordinary income.

xxxxxxx is still xxxxxxx to keep xxxxxxx xxxxxxx capital xxxxxxx and ordinary xxxxxxx gains/losses. This xxxxxxx due xxxxxxx xxxxxxx rules for xxxxxxx investors and xxxxxxx acquired prior xxxxxxx 1986.

**Question 11-11**

xxxxxxx is meant xxxxxxx an effective xxxxxxx xxxxxxx What xxxxxxx it measure?

xxxxxxx effective tax xxxxxxx is xxxxxxx xxxxxxx rate that xxxxxxx into account xxxxxxx effects of xxxxxxx and time xxxxxxx of money.

xxxxxxx measures the xxxxxxx xxxxxxx between xxxxxxx BTIRR and xxxxxxx ATIRR. This xxxxxxx is xxxxxxx xxxxxxx tax rate xxxxxxx can be xxxxxxx than the xxxxxxx marginal tax xxxxxxx This difference xxxxxxx also due xxxxxxx xxxxxxx fact xxxxxxx the interest xxxxxxx the mortgage xxxxxxx is xxxxxxx xxxxxxx *Do you xxxxxxx taxes affect xxxxxxx value of xxxxxxx estate versus xxxxxxx investments?*

Yes. Not xxxxxxx investments are xxxxxxx xxxxxxx when xxxxxxx comes to xxxxxxx income taxes. xxxxxxx taxes xxxxxxx xxxxxxx considered when xxxxxxx returns for xxxxxxx which are xxxxxxx taxed in xxxxxxx same manner. xxxxxxx that have xxxxxxx xxxxxxx before-tax xxxxxxx may have xxxxxxx different after-tax xxxxxxx 11-13

xxxxxxx xxxxxxx the significance xxxxxxx the passive xxxxxxx loss limitation xxxxxxx rules for xxxxxxx estate investors?

The xxxxxxx rules are xxxxxxx xxxxxxx in xxxxxxx passive losses xxxxxxx be used xxxxxxx offset xxxxxxx xxxxxxx another category. xxxxxxx any tax xxxxxxx from real xxxxxxx is usually xxxxxxx a passive xxxxxxx it can xxxxxxx xxxxxxx used xxxxxxx offset income xxxxxxx other sources xxxxxxx as xxxxxxx xxxxxxx from salaries xxxxxxx wages or xxxxxxx income from xxxxxxx or dividends.

*What is xxxxxxx leverage? Why xxxxxxx xxxxxxx one-year xxxxxxx of return xxxxxxx investment inadequate xxxxxxx determining xxxxxxx xxxxxxx positive or xxxxxxx financial leverage xxxxxxx Financial leverage xxxxxxx defined as xxxxxxx that may xxxxxxx to an xxxxxxx xxxxxxx borrowing xxxxxxx at a xxxxxxx of interest xxxxxxx is xxxxxxx xxxxxxx the expected xxxxxxx of return xxxxxxx total funds xxxxxxx in a xxxxxxx determine whether xxxxxxx is positive xxxxxxx xxxxxxx negative xxxxxxx the investor xxxxxxx to determine xxxxxxx the xxxxxxx xxxxxxx over the xxxxxxx holding period) xxxxxxx greater than xxxxxxx cost of xxxxxxx funds. A xxxxxxx measure of xxxxxxx xxxxxxx as xxxxxxx overall capitalization xxxxxxx can not xxxxxxx used xxxxxxx xxxxxxx does not xxxxxxx consider the xxxxxxx that accrue xxxxxxx the investor xxxxxxx time from xxxxxxx in income xxxxxxx xxxxxxx that xxxxxxx not affect xxxxxxx cost of xxxxxxx style="margin-left:-36.0pt;"> *

The xxxxxxx is the xxxxxxx interest rate xxxxxxx could be xxxxxxx on the xxxxxxx xxxxxxx the xxxxxxx becomes unfavorable. xxxxxxx represents the xxxxxxx rate xxxxxxx xxxxxxx leverage is xxxxxxx (neither favorable xxxxxxx unfavorable).

The xxxxxxx remains constant xxxxxxx of the xxxxxxx borrowed (that xxxxxxx xxxxxxx 70, xxxxxxx 80 percent xxxxxxx the property xxxxxxx equity xxxxxxx xxxxxxx would not xxxxxxx a break-even xxxxxxx rate when xxxxxxx a property xxxxxxx the investor xxxxxxx earns the xxxxxxx xxxxxxx rate xxxxxxx return as xxxxxxx lender on xxxxxxx same xxxxxxx xxxxxxx at the xxxxxxx provides no xxxxxxx premium to xxxxxxx investor. Normally, xxxxxxx risk premium xxxxxxx required because xxxxxxx xxxxxxx investor xxxxxxx the risk xxxxxxx variations in xxxxxxx performance xxxxxxx xxxxxxx property.

* What xxxxxxx positive and xxxxxxx financial leverage? xxxxxxx are returns xxxxxxx losses magnified xxxxxxx xxxxxxx degree xxxxxxx leverage increases? xxxxxxx does leverage xxxxxxx a xxxxxxx xxxxxxx differ from xxxxxxx on an xxxxxxx basis?*

When the xxxxxxx or after-tax xxxxxxx are higher xxxxxxx debt than xxxxxxx xxxxxxx we xxxxxxx that the xxxxxxx has positive xxxxxxx favorable xxxxxxx xxxxxxx When returns xxxxxxx lower with xxxxxxx than without xxxxxxx we say xxxxxxx the investment xxxxxxx negative or xxxxxxx xxxxxxx leverage.

Positive xxxxxxx occurs when xxxxxxx unlevered IRR xxxxxxx greater xxxxxxx xxxxxxx interest rate xxxxxxx on the xxxxxxx Negative leverage xxxxxxx when the xxxxxxx IRR is xxxxxxx than the xxxxxxx xxxxxxx paid xxxxxxx the debt.

xxxxxxx and losses xxxxxxx magnified xxxxxxx xxxxxxx greater the xxxxxxx of debt, xxxxxxx greater the xxxxxxx or loss xxxxxxx the equity xxxxxxx Leverage on xxxxxxx xxxxxxx basis xxxxxxx from leverage xxxxxxx an after-tax xxxxxxx because xxxxxxx xxxxxxx tax deductible. xxxxxxx we must xxxxxxx the after-tax xxxxxxx of debt xxxxxxx is different xxxxxxx the before-tax xxxxxxx xxxxxxx debt.

**Question 12-4**

Because xxxxxxx NOI does xxxxxxx change when xxxxxxx debt is xxxxxxx increasing the xxxxxxx xxxxxxx debt xxxxxxx the debt xxxxxxx relative to xxxxxxx Therefore, xxxxxxx xxxxxxx coverage ratio xxxxxxx may exceed xxxxxxx lender’s limits. xxxxxxx higher loan-to- xxxxxxx ratios and xxxxxxx debt coverage xxxxxxx xxxxxxx to xxxxxxx lender increases. xxxxxxx a result, xxxxxxx interest xxxxxxx xxxxxxx additional xxxxxxx will also xxxxxxx style="margin-left:-36.0pt;">

**Question xxxxxxx style="margin-left:-36.0pt;"> What xxxxxxx meant by xxxxxxx participation loan? xxxxxxx xxxxxxx the xxxxxxx participate in? xxxxxxx would a xxxxxxx want xxxxxxx xxxxxxx a xxxxxxx loan? Why xxxxxxx an investor xxxxxxx to obtain xxxxxxx participation loan?**

A xxxxxxx xxxxxxx for xxxxxxx a participation xxxxxxx includes how xxxxxxx the xxxxxxx xxxxxxx perceived relative xxxxxxx a fixed xxxxxxx interest rate xxxxxxx The lender xxxxxxx not participate xxxxxxx any losses xxxxxxx xxxxxxx receives xxxxxxx minimum interest xxxxxxx (unless xxxxxxx borrower xxxxxxx xxxxxxx the participation xxxxxxx the lender xxxxxxx somewhat of xxxxxxx hedge xxxxxxx unanticipated inflation xxxxxxx the NOI xxxxxxx xxxxxxx prices xxxxxxx an income xxxxxxx often increase xxxxxxx a xxxxxxx xxxxxxx of inflation. xxxxxxx some extent xxxxxxx protects the xxxxxxx real rate xxxxxxx return.

An investors xxxxxxx is that xxxxxxx xxxxxxx may xxxxxxx very little xxxxxxx zero for xxxxxxx or xxxxxxx xxxxxxx This is xxxxxxx the xxxxxxx is often xxxxxxx so that xxxxxxx participation is xxxxxxx on income xxxxxxx xxxxxxx flow xxxxxxx some specified xxxxxxx even point. xxxxxxx this xxxxxxx xxxxxxx the borrower xxxxxxx be paying xxxxxxx than would xxxxxxx been paid xxxxxxx a straight xxxxxxx loan. This xxxxxxx xxxxxxx quite xxxxxxx for the xxxxxxx since NOI xxxxxxx be xxxxxxx xxxxxxx the first xxxxxxx of years xxxxxxx ownership, xxxxxxx on a xxxxxxx project that xxxxxxx not fully xxxxxxx xxxxxxx is xxxxxxx by a xxxxxxx Why would xxxxxxx building xxxxxxx xxxxxxx to do xxxxxxx sale-leaseback of xxxxxxx land? What xxxxxxx the benefit xxxxxxx the party xxxxxxx purchases the xxxxxxx xxxxxxx a xxxxxxx When land xxxxxxx already owned xxxxxxx is xxxxxxx xxxxxxx to an xxxxxxx with a xxxxxxx agreement to xxxxxxx the land xxxxxxx the party xxxxxxx is sold xxxxxxx xxxxxxx is xxxxxxx a sale-leaseback xxxxxxx the land.

xxxxxxx motivation xxxxxxx xxxxxxx sale-leaseback of xxxxxxx land is xxxxxxx it is xxxxxxx way of xxxxxxx 100 percent xxxxxxx on the xxxxxxx xxxxxxx second xxxxxxx is that xxxxxxx payments are xxxxxxx percent xxxxxxx xxxxxxx With a xxxxxxx only the xxxxxxx is tax xxxxxxx The investor xxxxxxx deduct the xxxxxxx depreciation charges xxxxxxx xxxxxxx not xxxxxxx land is xxxxxxx since land xxxxxxx be xxxxxxx xxxxxxx results in xxxxxxx same depreciation xxxxxxx a smaller xxxxxxx investment.

The xxxxxxx may have xxxxxxx option of xxxxxxx xxxxxxx land xxxxxxx at the xxxxxxx of the xxxxxxx if xxxxxxx xxxxxxx desirable to xxxxxxx so.

**Question 12-7**

* xxxxxxx might an xxxxxxx prefer a xxxxxxx with a xxxxxxx interest rate xxxxxxx xxxxxxx participation?*

xxxxxxx investor’s motivation xxxxxxx that the xxxxxxx may xxxxxxx xxxxxxx little or xxxxxxx for one xxxxxxx more years. xxxxxxx is because xxxxxxx loan is xxxxxxx structured so xxxxxxx xxxxxxx participation xxxxxxx based on xxxxxxx or cash xxxxxxx above xxxxxxx xxxxxxx break-even point. xxxxxxx this time xxxxxxx the borrower xxxxxxx be paying xxxxxxx than would xxxxxxx been paid xxxxxxx xxxxxxx straight xxxxxxx This may xxxxxxx quite desirable xxxxxxx the xxxxxxx xxxxxxx NOI may xxxxxxx lower during xxxxxxx first couple xxxxxxx years of xxxxxxx especially on xxxxxxx new project xxxxxxx xxxxxxx not xxxxxxx rented.

**Question 12-8**

xxxxxxx might a xxxxxxx prefer xxxxxxx xxxxxxx with a xxxxxxx interest rate xxxxxxx a participation?

xxxxxxx lender’s motivation xxxxxxx making a xxxxxxx loan includes xxxxxxx xxxxxxx the xxxxxxx is perceived xxxxxxx to a xxxxxxx interest xxxxxxx xxxxxxx The lender xxxxxxx not participate xxxxxxx any losses xxxxxxx still receives xxxxxxx minimum interest xxxxxxx (unless the xxxxxxx xxxxxxx Additionally, xxxxxxx participation provides xxxxxxx lender with xxxxxxx of xxxxxxx xxxxxxx against unanticipated xxxxxxx because the xxxxxxx and resale xxxxxxx for an xxxxxxx property often xxxxxxx as a xxxxxxx xxxxxxx of xxxxxxx To some xxxxxxx this protects xxxxxxx lender’s xxxxxxx xxxxxxx of return.

**Question xxxxxxx How do xxxxxxx think participations xxxxxxx the riskiness xxxxxxx a loan?**

** xxxxxxx is clearly xxxxxxx xxxxxxx associated xxxxxxx the receipt xxxxxxx a participation xxxxxxx it xxxxxxx xxxxxxx the performance xxxxxxx the property. xxxxxxx lender does xxxxxxx participate in xxxxxxx losses and xxxxxxx receives some xxxxxxx xxxxxxx rate xxxxxxx the borrower xxxxxxx Additionally, the xxxxxxx provides xxxxxxx xxxxxxx with somewhat xxxxxxx a hedge xxxxxxx unanticipated inflation xxxxxxx the NOI xxxxxxx resale prices xxxxxxx an income xxxxxxx xxxxxxx increase xxxxxxx a result xxxxxxx inflation. To xxxxxxx extent xxxxxxx xxxxxxx the lender’s xxxxxxx rate of xxxxxxx 12-10**

*What xxxxxxx the motivation xxxxxxx a sale-leaseback xxxxxxx the land?*

xxxxxxx xxxxxxx for xxxxxxx sale-and-leaseback of xxxxxxx land is xxxxxxx it xxxxxxx xxxxxxx way of xxxxxxx 100 percent xxxxxxx on the xxxxxxx A second xxxxxxx is that xxxxxxx payments are xxxxxxx xxxxxxx tax xxxxxxx With a xxxxxxx only the xxxxxxx is xxxxxxx xxxxxxx The investor xxxxxxx deduct the xxxxxxx depreciation charges xxxxxxx or not xxxxxxx land is xxxxxxx since land xxxxxxx xxxxxxx depreciated. xxxxxxx results in xxxxxxx same depreciation xxxxxxx a xxxxxxx xxxxxxx investment. The xxxxxxx may have xxxxxxx option of xxxxxxx the land xxxxxxx at the xxxxxxx of the xxxxxxx xxxxxxx it xxxxxxx desirable to xxxxxxx so.

**Question 12-11**

xxxxxxx criteria xxxxxxx xxxxxxx used to xxxxxxx between two xxxxxxx alternatives?

Assuming the xxxxxxx financing alternatives xxxxxxx for roughly xxxxxxx same amount xxxxxxx xxxxxxx (so xxxxxxx risk due xxxxxxx leverage is xxxxxxx same), xxxxxxx xxxxxxx with the xxxxxxx effective interest xxxxxxx should be xxxxxxx This alternative xxxxxxx also result xxxxxxx the highest xxxxxxx xxxxxxx equity.

**Question xxxxxxx What is xxxxxxx traditional cash xxxxxxx approach xxxxxxx xxxxxxx how below-market xxxxxxx loans affect xxxxxxx equivalency was xxxxxxx in Chapter xxxxxxx where it xxxxxxx demonstrated that xxxxxxx xxxxxxx would xxxxxxx willing to xxxxxxx more for xxxxxxx property xxxxxxx xxxxxxx below market xxxxxxx rate loan. xxxxxxx that chapter, xxxxxxx present value xxxxxxx interest savings xxxxxxx used to xxxxxxx xxxxxxx additional xxxxxxx which might xxxxxxx paid for xxxxxxx property. xxxxxxx xxxxxxx approach could xxxxxxx used to xxxxxxx the additional xxxxxxx that might xxxxxxx paid for xxxxxxx producing properties xxxxxxx xxxxxxx in xxxxxxx chapter.**

**Question 12-13**

* xxxxxxx can the xxxxxxx of xxxxxxx xxxxxxx loans on xxxxxxx be determined xxxxxxx investor criteria?*

Note: xxxxxxx question is xxxxxxx explicitly covered xxxxxxx the chapter. xxxxxxx xxxxxxx students xxxxxxx think about xxxxxxx concepts from xxxxxxx chapters xxxxxxx xxxxxxx valuation and xxxxxxx equivalency might xxxxxxx applied to xxxxxxx a below-market xxxxxxx loan on xxxxxxx property.

Evaluating a xxxxxxx xxxxxxx loan xxxxxxx like comparing xxxxxxx financing alternatives xxxxxxx one xxxxxxx xxxxxxx the market xxxxxxx and one xxxxxxx a below-market xxxxxxx All else xxxxxxx equal, the xxxxxxx market interest xxxxxxx xxxxxxx should xxxxxxx in a xxxxxxx IRR_{E} for xxxxxxx property xxxxxxx xxxxxxx result with xxxxxxx market rate xxxxxxx The investor xxxxxxx therefore be xxxxxxx to pay xxxxxxx for the xxxxxxx xxxxxxx long xxxxxxx the IRR_{E xxxxxxx at least xxxxxxx much xxxxxxx xxxxxxx would be xxxxxxx the market xxxxxxx rate loan.}

**Question xxxxxxx What is xxxxxxx by partitioning xxxxxxx internal rate xxxxxxx xxxxxxx Why xxxxxxx this procedure xxxxxxx To illustrate xxxxxxx is xxxxxxx xxxxxxx partitioning the xxxxxxx remember that xxxxxxx IRR is xxxxxxx up of xxxxxxx components of xxxxxxx flow:**

1. xxxxxxx xxxxxxx from xxxxxxx 2. cash xxxxxxx from the xxxxxxx of xxxxxxx xxxxxxx Partitioning is xxxxxxx to obtain xxxxxxx idea of xxxxxxx relative weights xxxxxxx these components xxxxxxx return and xxxxxxx xxxxxxx an xxxxxxx of the xxxxxxx of the xxxxxxx of xxxxxxx xxxxxxx portion of xxxxxxx return.

** Partitioning xxxxxxx meaningful because xxxxxxx helps the xxxxxxx to determine xxxxxxx much of xxxxxxx xxxxxxx is xxxxxxx annual operating xxxxxxx flow and xxxxxxx much xxxxxxx xxxxxxx the projected xxxxxxx cash flow. xxxxxxx cash flow xxxxxxx generally more xxxxxxx than projected xxxxxxx cash flow. xxxxxxx xxxxxxx greater xxxxxxx proportion of xxxxxxx cash flow xxxxxxx operating xxxxxxx xxxxxxx the greater xxxxxxx risk facing xxxxxxx investor. This xxxxxxx be useful xxxxxxx comparing multiple xxxxxxx 13-2**

*What xxxxxxx xxxxxxx risk xxxxxxx Why does xxxxxxx a premium xxxxxxx between xxxxxxx xxxxxxx on mortgages xxxxxxx rates of xxxxxxx earned on xxxxxxx invested in xxxxxxx estate?*

A risk xxxxxxx is a xxxxxxx xxxxxxx rate xxxxxxx return paid xxxxxxx an investor xxxxxxx compensation xxxxxxx xxxxxxx additional risk xxxxxxx a higher xxxxxxx investment. In xxxxxxx investors are xxxxxxx risk averse xxxxxxx must be xxxxxxx xxxxxxx the xxxxxxx risk of xxxxxxx investments.

This xxxxxxx exists xxxxxxx xxxxxxx interest rates xxxxxxx returns on xxxxxxx invested in xxxxxxx estate because xxxxxxx equity investor xxxxxxx assuming more xxxxxxx xxxxxxx the xxxxxxx lender. The xxxxxxx assumes less xxxxxxx because xxxxxxx xxxxxxx would have xxxxxxx claim on xxxxxxx property should xxxxxxx be a xxxxxxx If this xxxxxxx not the xxxxxxx xxxxxxx investor xxxxxxx be better xxxxxxx lending on xxxxxxx estate xxxxxxx xxxxxxx in it.

**Question xxxxxxx What are xxxxxxx of the xxxxxxx of risk xxxxxxx should be xxxxxxx when analyzing xxxxxxx xxxxxxx and xxxxxxx categories of xxxxxxx Business Risk, xxxxxxx Risk, xxxxxxx xxxxxxx Inflation Risk, xxxxxxx Risk, Interest xxxxxxx Risk, Legislative xxxxxxx Environmental Risk**

**Question xxxxxxx What is xxxxxxx difference between xxxxxxx xxxxxxx and xxxxxxx risk?**

Business xxxxxxx is the xxxxxxx of xxxxxxx xxxxxxx to fluctuations xxxxxxx economic activity xxxxxxx affect the xxxxxxx of income xxxxxxx by a xxxxxxx Financial risk xxxxxxx xxxxxxx financing xxxxxxx to as xxxxxxx leverage) magnifies xxxxxxx business xxxxxxx xxxxxxx risk increases xxxxxxx the amount xxxxxxx debt increases.

**Question xxxxxxx Why is xxxxxxx variance (or xxxxxxx deviation) used xxxxxxx xxxxxxx measure xxxxxxx risk? What xxxxxxx the advantages xxxxxxx disadvantages xxxxxxx xxxxxxx risk measure?**

*Lower xxxxxxx in returns xxxxxxx considered by xxxxxxx analysts to xxxxxxx associated with xxxxxxx risk and xxxxxxx xxxxxxx Therefore, xxxxxxx using a xxxxxxx measure of xxxxxxx one xxxxxxx xxxxxxx indication of xxxxxxx extent risk xxxxxxx present in xxxxxxx investment. The xxxxxxx deviation gives xxxxxxx a specific xxxxxxx xxxxxxx which xxxxxxx can expect xxxxxxx actual return xxxxxxx each xxxxxxx xxxxxxx fall in xxxxxxx to its xxxxxxx return. It xxxxxxx the advantage xxxxxxx being relatively xxxxxxx to calculate. xxxxxxx xxxxxxx the xxxxxxx of treating xxxxxxx both higher xxxxxxx expected xxxxxxx xxxxxxx lower than xxxxxxx returns the xxxxxxx It could xxxxxxx argued, however, xxxxxxx investors should xxxxxxx more concerned xxxxxxx xxxxxxx being xxxxxxx than expected xxxxxxx lower than xxxxxxx threshold xxxxxxx xxxxxxx What is xxxxxxx by a ‘ xxxxxxx option’ ?*

A real xxxxxxx is an xxxxxxx related to xxxxxxx in tangible xxxxxxx xxxxxxx real xxxxxxx that involves xxxxxxx option to xxxxxxx to xxxxxxx xxxxxxx to invest xxxxxxx capital based xxxxxxx future economic xxxxxxx Land can xxxxxxx viewed as xxxxxxx the option xxxxxxx xxxxxxx additional xxxxxxx in the xxxxxxx to construct xxxxxxx building.

**Question xxxxxxx xxxxxxx meant by xxxxxxx term ‘overage’ xxxxxxx retail space ?**

**Overage xxxxxxx to the xxxxxxx that is xxxxxxx above the xxxxxxx xxxxxxx in xxxxxxx lease where xxxxxxx rent is xxxxxxx on xxxxxxx xxxxxxx of the xxxxxxx sales once xxxxxxx exceeds a xxxxxxx breakpoint. The xxxxxxx rent is xxxxxxx minimum rent xxxxxxx xxxxxxx overage xxxxxxx 13-8**

* How xxxxxxx the use xxxxxxx scenarios xxxxxxx xxxxxxx sensitivity analysis ?*

Sensitivity xxxxxxx involves changing xxxxxxx variable at xxxxxxx time such xxxxxxx the market xxxxxxx or the xxxxxxx xxxxxxx Scenarious xxxxxxx changing several xxxxxxx at once xxxxxxx each xxxxxxx xxxxxxx a pessimistic, xxxxxxx likely, and xxxxxxx scenario. For xxxxxxx scenario there xxxxxxx be a xxxxxxx assumption about xxxxxxx xxxxxxx vacancy xxxxxxx and the xxxxxxx price because xxxxxxx are xxxxxxx xxxxxxx What factors xxxxxxx an investor xxxxxxx when trying xxxxxxx decide whether xxxxxxx dispose of xxxxxxx property that xxxxxxx xxxxxxx owned xxxxxxx several years?

xxxxxxx factors are xxxxxxx on xxxxxxx xxxxxxx or marginal, xxxxxxx criteria that xxxxxxx be utilized xxxxxxx investors when xxxxxxx with such xxxxxxx making.

The xxxxxxx xxxxxxx evaluate xxxxxxx expected future xxxxxxx of the xxxxxxx and xxxxxxx xxxxxxx the IRR xxxxxxx holding versus xxxxxxx of the xxxxxxx The investor xxxxxxx consider whether xxxxxxx net funds xxxxxxx xxxxxxx the xxxxxxx of the xxxxxxx (after tax xxxxxxx expenses) xxxxxxx xxxxxxx reinvested at xxxxxxx greater rate xxxxxxx return (ATIRR) xxxxxxx the return xxxxxxx would be xxxxxxx if the xxxxxxx xxxxxxx not xxxxxxx laws in xxxxxxx at the xxxxxxx of xxxxxxx xxxxxxx a property. xxxxxxx law changes xxxxxxx the relative xxxxxxx of existing xxxxxxx new investors xxxxxxx the same xxxxxxx xxxxxxx *Why xxxxxxx the actual xxxxxxx period for xxxxxxx property xxxxxxx xxxxxxx from the xxxxxxx period that xxxxxxx anticipated when xxxxxxx property was xxxxxxx An investor xxxxxxx a real xxxxxxx xxxxxxx based xxxxxxx the benefits xxxxxxx to be xxxxxxx over xxxxxxx xxxxxxx holding period. xxxxxxx is, the xxxxxxx computes the xxxxxxx measures of xxxxxxx performance based xxxxxxx expectations at xxxxxxx xxxxxxx the xxxxxxx is purchased. xxxxxxx the property xxxxxxx purchased, xxxxxxx xxxxxxx things can xxxxxxx that affect xxxxxxx actual performance xxxxxxx the property. xxxxxxx same factors xxxxxxx affect the xxxxxxx xxxxxxx as xxxxxxx whether the xxxxxxx continues to xxxxxxx his xxxxxxx xxxxxxx For example, xxxxxxx rents may xxxxxxx be increasing xxxxxxx fast as xxxxxxx thus reducing xxxxxxx investor’s cash xxxxxxx xxxxxxx laws xxxxxxx have changed, xxxxxxx they did xxxxxxx 1986, xxxxxxx xxxxxxx the benefit xxxxxxx some investors xxxxxxx than others. xxxxxxx point is xxxxxxx a periodic xxxxxxx should be xxxxxxx xxxxxxx determine xxxxxxx properties should xxxxxxx sold.*

**Question 14-3**

* xxxxxxx is xxxxxxx xxxxxxx rate of xxxxxxx How is xxxxxxx callated?*

The xxxxxxx rate of xxxxxxx is the xxxxxxx gained by xxxxxxx xxxxxxx property xxxxxxx one additional xxxxxxx The marginal xxxxxxx of xxxxxxx xxxxxxx what the xxxxxxx could get xxxxxxx the future xxxxxxx keeping the xxxxxxx versus what xxxxxxx could get xxxxxxx xxxxxxx selling xxxxxxx property.

The xxxxxxx rate of xxxxxxx is xxxxxxx xxxxxxx the benefit xxxxxxx receiving the xxxxxxx from operations xxxxxxx one additional xxxxxxx and the xxxxxxx from the xxxxxxx xxxxxxx the xxxxxxx at the xxxxxxx of the xxxxxxx year.

xxxxxxx xxxxxxx formula is xxxxxxx page 427 xxxxxxx the text.

**Question xxxxxxx What causes xxxxxxx marginal rate xxxxxxx return to xxxxxxx xxxxxxx time? xxxxxxx can the xxxxxxx rate of xxxxxxx be xxxxxxx xxxxxxx decide when xxxxxxx sell a xxxxxxx Increasing rents xxxxxxx increases in xxxxxxx value of xxxxxxx property tend xxxxxxx xxxxxxx the xxxxxxx Equity buildup xxxxxxx the price xxxxxxx and xxxxxxx xxxxxxx however, tends xxxxxxx lower the xxxxxxx Also, because xxxxxxx depreciation deduction xxxxxxx fixed but xxxxxxx are rising, xxxxxxx xxxxxxx amount xxxxxxx tax benefits xxxxxxx depreciation decreases xxxxxxx year.**

** xxxxxxx xxxxxxx should be xxxxxxx when the xxxxxxx rate of xxxxxxx falls below xxxxxxx rate at xxxxxxx funds can xxxxxxx xxxxxxx 14-5**

* xxxxxxx might the xxxxxxx internal rate xxxxxxx return xxxxxxx xxxxxxx (ATIRR _{e}) differ xxxxxxx a new xxxxxxx versus an xxxxxxx investor who xxxxxxx the property?*

xxxxxxx could be xxxxxxx xxxxxxx tax xxxxxxx changes that xxxxxxx the relative xxxxxxx of xxxxxxx xxxxxxx new investors xxxxxxx the same xxxxxxx If the xxxxxxx law becomes xxxxxxx favorable as xxxxxxx did in xxxxxxx xxxxxxx tends xxxxxxx favor existing xxxxxxx If the xxxxxxx law xxxxxxx xxxxxxx favorable, as xxxxxxx did in xxxxxxx when ACRS xxxxxxx passed and xxxxxxx lives were xxxxxxx considerably, then xxxxxxx xxxxxxx tend xxxxxxx be favored.

** xxxxxxx law changes xxxxxxx to xxxxxxx xxxxxxx turnover or xxxxxxx of real xxxxxxx It is xxxxxxx to understand xxxxxxx concepts since xxxxxxx laws are xxxxxxx xxxxxxx to xxxxxxx and these xxxxxxx affect the xxxxxxx risk xxxxxxx xxxxxxx opportunities for xxxxxxx and existing xxxxxxx 14-6**

*What xxxxxxx should be xxxxxxx when deciding xxxxxxx to renovate xxxxxxx xxxxxxx To xxxxxxx whether a xxxxxxx should be xxxxxxx consider xxxxxxx xxxxxxx benefit associated xxxxxxx renovating the xxxxxxx versus not xxxxxxx the property.*

**Question xxxxxxx Why is xxxxxxx often done xxxxxxx xxxxxxx with xxxxxxx When properties xxxxxxx renovated, the xxxxxxx often xxxxxxx xxxxxxx opportunity to xxxxxxx the entire xxxxxxx Thus, the xxxxxxx may be xxxxxxx to borrow xxxxxxx in addition xxxxxxx xxxxxxx is xxxxxxx for the xxxxxxx especially if xxxxxxx investor xxxxxxx xxxxxxx obtain a xxxxxxx loan on xxxxxxx entire property xxxxxxx than obtain xxxxxxx second mortgage xxxxxxx cover the xxxxxxx xxxxxxx The xxxxxxx amount of xxxxxxx that the xxxxxxx will xxxxxxx xxxxxxx to borrow xxxxxxx usually based xxxxxxx a percentage xxxxxxx the estimated xxxxxxx of the xxxxxxx after renovation xxxxxxx xxxxxxx 14-8**

* xxxxxxx would refinancing xxxxxxx an alternative xxxxxxx sale xxxxxxx xxxxxxx property?*

** Refinancing xxxxxxx increase financial xxxxxxx Refinancing at xxxxxxx higher loan-to-current-value xxxxxxx may provide xxxxxxx investor with xxxxxxx xxxxxxx to xxxxxxx This, to xxxxxxx extent, is xxxxxxx alternative xxxxxxx xxxxxxx of the xxxxxxx No taxes xxxxxxx to be xxxxxxx on funds xxxxxxx by additional xxxxxxx whereas taxes xxxxxxx xxxxxxx to xxxxxxx paid if xxxxxxx property is xxxxxxx 14-9**

* xxxxxxx xxxxxxx tax law xxxxxxx create incentives xxxxxxx investors to xxxxxxx their properties xxxxxxx other investors?*

xxxxxxx law changes xxxxxxx xxxxxxx relative xxxxxxx of existing xxxxxxx new investors xxxxxxx the xxxxxxx xxxxxxx If the xxxxxxx law becomes xxxxxxx favorable as xxxxxxx did in xxxxxxx this tends xxxxxxx favor existing xxxxxxx xxxxxxx the xxxxxxx law becomes xxxxxxx favorable, as xxxxxxx did xxxxxxx xxxxxxx when ACRS xxxxxxx passed and xxxxxxx lives were xxxxxxx considerably, then xxxxxxx investors tend xxxxxxx be favored.

xxxxxxx xxxxxxx changes xxxxxxx to affect xxxxxxx turnover or xxxxxxx of xxxxxxx xxxxxxx It is xxxxxxx to understand xxxxxxx concepts since xxxxxxx laws are xxxxxxx subject to xxxxxxx and these xxxxxxx xxxxxxx the xxxxxxx risk and xxxxxxx opportunities for xxxxxxx and xxxxxxx xxxxxxx 14-10

*How xxxxxxx are taxes xxxxxxx the decision xxxxxxx sell a xxxxxxx are important xxxxxxx a number xxxxxxx xxxxxxx If xxxxxxx property is xxxxxxx capital gains xxxxxxx must xxxxxxx xxxxxxx paid. This xxxxxxx the opportunity xxxxxxx of selling xxxxxxx keeping the xxxxxxx Also, tax xxxxxxx may have xxxxxxx xxxxxxx the xxxxxxx was purchased. xxxxxxx means that xxxxxxx depreciation xxxxxxx xxxxxxx to a xxxxxxx investor might xxxxxxx better or xxxxxxx than that xxxxxxx the current xxxxxxx is using. xxxxxxx xxxxxxx the xxxxxxx that a xxxxxxx investor can xxxxxxx relative xxxxxxx xxxxxxx which the xxxxxxx owner can xxxxxxx by keeping xxxxxxx property.*

**Question 14-11**

xxxxxxx tax considerations xxxxxxx in renovation xxxxxxx xxxxxxx the xxxxxxx may result xxxxxxx an increased xxxxxxx basis xxxxxxx xxxxxxx tax deductions. xxxxxxx there may xxxxxxx tax credits xxxxxxx for renovating xxxxxxx property.

**Question 14-12**

* xxxxxxx are the xxxxxxx xxxxxxx costs xxxxxxx renovation?*

In xxxxxxx renovation can xxxxxxx many xxxxxxx xxxxxxx increasing rents, xxxxxxx vacancy, lowering xxxxxxx expenses and xxxxxxx the future xxxxxxx value.

**Question 14-13**

xxxxxxx you think xxxxxxx xxxxxxx more xxxxxxx less risky xxxxxxx a new xxxxxxx can xxxxxxx xxxxxxx risky because xxxxxxx the uncertainty xxxxxxx to the xxxxxxx of the xxxxxxx It is xxxxxxx easier to xxxxxxx xxxxxxx costs xxxxxxx new construction xxxxxxx to the xxxxxxx of xxxxxxx xxxxxxx older building xxxxxxx may have xxxxxxx structural and xxxxxxx problems.

**Question 14-14**

* xxxxxxx is meant xxxxxxx the “incremental xxxxxxx xxxxxxx refinancing?”*

xxxxxxx the interest xxxxxxx is higher xxxxxxx the xxxxxxx xxxxxxx amount, the xxxxxxx cost of xxxxxxx additional funds xxxxxxx is even xxxxxxx than the xxxxxxx on the xxxxxxx xxxxxxx This xxxxxxx due to xxxxxxx fact that xxxxxxx higher xxxxxxx xxxxxxx to be xxxxxxx on all xxxxxxx funds borrowed, xxxxxxx just the xxxxxxx funds.

For xxxxxxx to be xxxxxxx xxxxxxx strategy, xxxxxxx effective cost xxxxxxx the debt xxxxxxx be xxxxxxx xxxxxxx the unlevered xxxxxxx on the xxxxxxx being financed.

**Question xxxxxxx In general, xxxxxxx kinds of xxxxxxx incentives are xxxxxxx xxxxxxx rehabilitation xxxxxxx real estate xxxxxxx property?**

There are xxxxxxx tax xxxxxxx xxxxxxx rehabilitation. For xxxxxxx investment tax xxxxxxx are available xxxxxxx certain rehabilitation xxxxxxx A property xxxxxxx in service xxxxxxx xxxxxxx may xxxxxxx eligible for xxxxxxx 10% credit xxxxxxx a xxxxxxx xxxxxxx is a xxxxxxx historic structure xxxxxxx be eligible xxxxxxx a 20% xxxxxxx There are xxxxxxx credits available xxxxxxx xxxxxxx of xxxxxxx income housing.

**Question xxxxxxx What are xxxxxxx main xxxxxxx xxxxxxx corporations may xxxxxxx to own xxxxxxx estate?**

There are xxxxxxx number of xxxxxxx a corporation xxxxxxx decide to xxxxxxx xxxxxxx than xxxxxxx real estate. xxxxxxx may find xxxxxxx owning xxxxxxx xxxxxxx expensive than xxxxxxx when considering xxxxxxx cost of xxxxxxx and the xxxxxxx benefits of xxxxxxx The corporation xxxxxxx xxxxxxx want xxxxxxx have more xxxxxxx over the xxxxxxx estate xxxxxxx xxxxxxx possible with xxxxxxx It may xxxxxxx feel that xxxxxxx real estate xxxxxxx diversification of xxxxxxx asset base.

**Question xxxxxxx xxxxxxx factors xxxxxxx tend to xxxxxxx leasing more xxxxxxx than xxxxxxx xxxxxxx of leasing xxxxxxx be less xxxxxxx the cost xxxxxxx owning the xxxxxxx especially if xxxxxxx company can xxxxxxx xxxxxxx the xxxxxxx benefits associated xxxxxxx owning. The xxxxxxx may xxxxxxx xxxxxxx concerned about xxxxxxx effect that xxxxxxx real estate xxxxxxx have on xxxxxxx income and xxxxxxx sheets. It xxxxxxx xxxxxxx prefer xxxxxxx flexibility associated xxxxxxx leasing, especially xxxxxxx the xxxxxxx xxxxxxx plans to xxxxxxx the space xxxxxxx a short xxxxxxx of time.**

**Question xxxxxxx Why might xxxxxxx cost of xxxxxxx xxxxxxx loan xxxxxxx greater than xxxxxxx cost of xxxxxxx unsecured xxxxxxx xxxxxxx to finance xxxxxxx real estate?**

xxxxxxx loans are xxxxxxx on a xxxxxxx basis for xxxxxxx estate income xxxxxxx xxxxxxx means xxxxxxx the risk xxxxxxx default must xxxxxxx built xxxxxxx xxxxxxx mortgage interest xxxxxxx A corporation xxxxxxx a high xxxxxxx rating may xxxxxxx that it xxxxxxx borrow money xxxxxxx xxxxxxx cheaper xxxxxxx based on xxxxxxx credit worthiness xxxxxxx the xxxxxxx xxxxxxx is, the xxxxxxx may be xxxxxxx risky than xxxxxxx specific property xxxxxxx the company xxxxxxx to finance.

**Question xxxxxxx **