Podcast
Questions and Answers
What is the break-even occupancy level determined by?
What is the break-even occupancy level determined by?
- Adding operating expenses to debt service and dividing by gross potential revenue.
- Subtracting operating expenses from effective gross income and dividing by the operating expense ratio.
- Subtracting debt service from before-tax cash flow and dividing by net operating income.
- Adding vacancy and rent loss allowances to net operating income and dividing by operating expenses. (correct)
Feasibility studies primarily address which question?
Feasibility studies primarily address which question?
- What are the philosophical limitations?
- What is the timeline for implementation?
- What is the lowest cost alternative?
- What will work? (correct)
Preliminary financial feasibility testing focuses on which aspect?
Preliminary financial feasibility testing focuses on which aspect?
- Legal hurdles the project may face.
- Forecasting long-term cash flows.
- Estimating the maximum project cost.
- Threshold questions about the venture's acceptability. (correct)
What question do feasibility studies NOT address?
What question do feasibility studies NOT address?
What type of testing does preliminary financial feasibility involve?
What type of testing does preliminary financial feasibility involve?
What does a debt coverage ratio of 1.2 indicate?
What does a debt coverage ratio of 1.2 indicate?
Which of the following is a key component in calculating break-even occupancy?
Which of the following is a key component in calculating break-even occupancy?
What is a key criterion for a proposal to be considered feasible?
What is a key criterion for a proposal to be considered feasible?
What does feasibility analysis primarily assess?
What does feasibility analysis primarily assess?
What part of a feasibility report succinctly presents the analyst's findings and recommendations?
What part of a feasibility report succinctly presents the analyst's findings and recommendations?
What is the primary purpose of conducting a feasibility analysis?
What is the primary purpose of conducting a feasibility analysis?
In real estate feasibility analysis, which problem relates to assessing various funding options?
In real estate feasibility analysis, which problem relates to assessing various funding options?
When assessing a proposal’s feasibility, what key aspect is considered in financial terms?
When assessing a proposal’s feasibility, what key aspect is considered in financial terms?
When preparing a feasibility study, what must be ensured regarding the objectives of the proposal?
When preparing a feasibility study, what must be ensured regarding the objectives of the proposal?
What does the executive summary of a feasibility report typically exclude?
What does the executive summary of a feasibility report typically exclude?
Flashcards
Feasibility of a Proposal
Feasibility of a Proposal
A proposal is considered feasible when there's a strong likelihood of achieving its goals and objectives within a specific context.
Feasibility Analysis
Feasibility Analysis
Feasibility analysis helps determine if a planned course of action is likely to meet the goals or objectives of the business or project. It focuses on aligning actions with the desired outcomes.
Graaskamp's Real Estate Feasibility Analysis
Graaskamp's Real Estate Feasibility Analysis
Graaskamp's concept highlights three key aspects of real estate feasibility analysis. It focuses on how resources, objectives, and environments are aligned to create a successful real estate project.
Mortgage Loan Support Capacity
Mortgage Loan Support Capacity
Signup and view all the flashcards
Executive Summary in Feasibility Reports
Executive Summary in Feasibility Reports
Signup and view all the flashcards
What is break-even occupancy level?
What is break-even occupancy level?
Signup and view all the flashcards
What makes a project feasible?
What makes a project feasible?
Signup and view all the flashcards
What is a feasibility study?
What is a feasibility study?
Signup and view all the flashcards
What is the debt coverage ratio?
What is the debt coverage ratio?
Signup and view all the flashcards
How to calculate maximum mortgage loan?
How to calculate maximum mortgage loan?
Signup and view all the flashcards
What does preliminary financial feasibility testing cover?
What does preliminary financial feasibility testing cover?
Signup and view all the flashcards
What is Effective Gross Income (EGI)?
What is Effective Gross Income (EGI)?
Signup and view all the flashcards
What is the operating expense ratio?
What is the operating expense ratio?
Signup and view all the flashcards
What is a debt service constant (DSC)?
What is a debt service constant (DSC)?
Signup and view all the flashcards
What is the debt coverage ratio?
What is the debt coverage ratio?
Signup and view all the flashcards
Study Notes
Break-Even Occupancy Level
- Determined by adding operating expenses and debt service, then dividing by gross potential revenue.
Feasibility of a Proposal
- A feasible proposal needs a reasonable likelihood of meeting explicit objectives, not necessarily moral defensibility.
- Physical possibility, legality, and financial feasibility are crucial for a proposal to be considered feasible.
Feasibility Studies
- Feasibility studies determine the best course of action to achieve investor objectives.
- They focus on what will work, not what should be done.
Maximum Mortgage Loan
- If a lender requires a debt coverage ratio of 1.2 and net operating income is $250,000, with an annual debt service constant of 0.105:
- The maximum mortgage loan supported is more than $1.8 million but less than $2.0 million.
Preliminary Financial Feasibility Testing
- Preliminary financial feasibility testing assesses if a venture is acceptable, examines solvency, and estimates minimum project revenue.
- All of these points are covered in this testing.
Feasible Proposal
- A feasible proposal indicates a reasonable likelihood of attaining explicit objectives.
- It considers expected cash inflows and expenditures, along with their associated confidence levels.
Feasibility Analysis
- Feasibility analysis determines if a planned action will meet enterprise objectives, not necessarily maximum profitability, social responsibility, or addressing community objections.
Graaskamp's Feasibility Analysis
- Graaskamp's analysis divides real estate feasibility into three parts:
- Investigating alternative uses for a predetermined site
- Investigating alternative sites for a predetermined use
- Investigating alternative investment opportunities given predetermined funds.
- Analysing alternative environments, given predetermined objectives ( not a part of his analysis).
Maximum Mortgage Loan (Example 2)
- Given operating expenses of $250,000, potential gross income of $650,000, and a maximum acceptable default ratio of 0.85, with an annual debt service constant of 0.105:
- The largest mortgage loan is less than $2.9 million.
Feasibility Report Summary
- The executive summary provides a concise overview of key details, findings, and recommendations without the supporting rationale.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Test your understanding of key concepts in real estate feasibility studies, including break-even occupancy levels and maximum mortgage loan calculations. Learn the criteria for proposal feasibility and explore preliminary financial testing methods. This quiz will help solidify your knowledge in evaluating investment proposals.
