Podcast
Questions and Answers
What is the break-even occupancy level determined by?
What is the break-even occupancy level determined by?
Feasibility studies primarily address which question?
Feasibility studies primarily address which question?
Preliminary financial feasibility testing focuses on which aspect?
Preliminary financial feasibility testing focuses on which aspect?
What question do feasibility studies NOT address?
What question do feasibility studies NOT address?
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What type of testing does preliminary financial feasibility involve?
What type of testing does preliminary financial feasibility involve?
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What does a debt coverage ratio of 1.2 indicate?
What does a debt coverage ratio of 1.2 indicate?
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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?
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What is a key criterion for a proposal to be considered feasible?
What is a key criterion for a proposal to be considered feasible?
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What does feasibility analysis primarily assess?
What does feasibility analysis primarily assess?
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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?
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What is the primary purpose of conducting a feasibility analysis?
What is the primary purpose of conducting a feasibility analysis?
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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?
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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?
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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?
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What does the executive summary of a feasibility report typically exclude?
What does the executive summary of a feasibility report typically exclude?
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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.
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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.
