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Questions and Answers
Which type of tax should a developer worry about the most when purchasing land for development?
What is the primary concern for a lender regarding property taxes?
Which approved project could indicate higher property tax expenses in the future?
Which entity typically resolves disputes over property appraisals for tax purposes?
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Which of the following property rights is least likely to be subject to property taxes?
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What sort of costs should a developer consider when comparing different financing alternatives?
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Which factor most heavily influences the assessment of property taxes?
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What outcome can occur if property taxes remain unpaid?
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What is the purpose of incorporating leverage into an operating projection?
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What can be a consequence of excessive property taxes for property developers?
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Study Notes
Unit 9: The Cost of Borrowed Money
- Covers calculating loan payments and annual debt service.
- Explains methods for comparing costs and benefits of different debt structures.
- Includes sections on interest costs and rates, comparing financing options, and incorporating leverage into financial projections.
Quiz Questions & Answers
- Question 1: The developer should be most concerned with highest and best use taxes, as these reflect the property's potential value for development, not its current use.
- Question 2: A lender's greatest concern regarding property taxes is non-payment, as it signals potential borrower default and could lead to foreclosure complications and high holding costs. This is also an early warning sign. Property taxes often have super priority status meaning that they are paid first in a foreclosure.
- Question 3: Increased property tax expenses could result from expansion of local high school and other projects that increase the demand for and thus value of properties in that area.
- Question 4: Disputes over property appraisals used for tax calculations are typically handled by the Board of equalization.
- Question 5: A three-year residential lease is most likely NOT liable for property taxes, as it's a relatively short-term interest in the property. Property taxes are typically levied on ownership interests.
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Description
This quiz focuses on the financial implications of borrowed money, including how to calculate loan payments and annual debt service. It evaluates different debt structures, interest costs, and the importance of property taxes for lenders. Test your understanding of financing options and leverage in financial projections.
