Video 5: Real Estate Asset Classes & What Makes Them Special
Take this quiz to recap everything that was discussed in video five.
Being involved in a capital intensive market means that...
YOU'RE CORRECT!
In a capital-intensive market like real estate, investments require a lot of money. When dealing with capital-intensive markets, the price by which capital is obtained can make or break the success of a property.
YOU'RE WRONG!
In a capital-intensive market like real estate, investments require a lot of money. When dealing with capital-intensive markets, the price by which capital is obtained can make or break the success of a property.
Why are hotels considered to have the highest operating leverage?
YOU'RE CORRECT!
Hotels have full control over the price of a room for one night and can adjust the fee whenever they choose since leases are typically short.
YOU'RE WRONG!
Hotels have full control over the price of a room for one night and can adjust the fee whenever they choose since leases are typically short.
What is the point of flagging your hotel?
YOU'RE CORRECT!
A flagship is simply paying a premium in order to receive the brand name of a more popular hotel chain. The flag provider can get involved in the hotel at various levels, depending on preference. The most basic flag simply means adopting the name, but in some extreme cases, the flag provider can manage and even own the hotel.
YOU'RE WRONG!
A flagship is simply paying a premium in order to receive the brand name of a more popular hotel chain. The flag provider can get involved in the hotel at various levels, depending on preference. The most basic flag simply means adopting the name, but in some extreme cases, the flag provider can manage and even own the hotel.
Why does signing tenants to a triple net lease eliminate an aspect of risk?
YOU'RE CORRECT!
When tenants are signed to a triple net lease, they are responsible for all operating expenses. With all the operating expenses taken care of, there is no uncertainty about whether or not they will be paid off.
YOU'RE WRONG!
When tenants are signed to a triple net lease, they are responsible for all operating expenses. With all the operating expenses taken care of, there is no uncertainty about whether or not they will be paid off.
Why do warehouses differ from other sectors?
YOU'RE CORRECT!
When investing in warehouses, aesthetics and amenities are negligible, allowing you to focus more capital on creating a streamlined asset, increasing revenue and property value.
YOU'RE WRONG!
When investing in warehouses, aesthetics and amenities are negligible, allowing you to focus more capital on creating a streamlined asset, increasing revenue and property value.
What makes warehouse locations so easy to obtain?
YOU'RE CORRECT!
Warehouses are typically located near highways and in areas with a lot of space, not near any people. The preferred qualifications for a warehouse space are undesirable for other asset classes.
YOU'RE WRONG!
Warehouses are typically located near highways and in areas with a lot of space, not near any people. The preferred qualifications for a warehouse space are undesirable for other asset classes.
Why are flex buildings unsuccessful in soft markets?
YOU'RE CORRECT!
Flex buildings only work in certain circumstances, under certain conditions. The most practical use for a flex building is when a producer puts his office in his warehouse to save money. However, in soft markets offices are cheap, making it easy to have a warehouse and an office without sacrificing too much money.
YOU'RE WRONG!
Flex buildings only work in certain circumstances, under certain conditions. The most practical use for a flex building is when a producer puts his office in his warehouse to save money. However, in soft markets offices are cheap, making it easy to have a warehouse and an office without sacrificing too much money.
What is the downside to investing in land real estate?
YOU'RE CORRECT!
With land real estate you are betting on something that you assume will happen in the future. It may take anywhere from 3 years to 15 years to see any sort of development on the land.
YOU'RE WRONG!
With land real estate you are betting on something that you assume will happen in the future. It may take anywhere from 3 years to 15 years to see any sort of development on the land.
What makes the security deposit so ideal for the landlord?
YOU'RE CORRECT!
When investing in manufactured housing, you are investing in a land lease. If a tenant fails to pay their rent then like any other lease, the property is returned to the landowner.
YOU'RE WRONG!
When investing in manufactured housing, you are investing in a land lease. If a tenant fails to pay their rent then like any other lease, the property is returned to the landowner.
What makes CBD homes less desirable for families with kids?
YOU'RE CORRECT!
CBD, which stands for central business district, is often not fitted for kids, meaning that for a child to get a quality education, they might have to commute to more suitable areas.
YOU'RE WRONG!
CBD, which stands for central business district, is often not fitted for kids, meaning that for a child to get a quality education, they might have to commute to more suitable areas.
Why don't you price by square foot with garden apartments?
YOU'RE CORRECT!
Garden apartments in one development are typically similar in size. The variation of 200 SF to 400 SF between apartments gets overshadowed by other factors, such as the floor the apartment is on and the quality of the apartment finishes.
YOU'RE WRONG!
Garden apartments in one development are typically similar in size. The variation of 200 SF to 400 SF between apartments gets overshadowed by other factors, such as the floor the apartment is on and the quality of the apartment finishes.
A mid-rise building is only sensible when ...
YOU'RE CORRECT!
Mid-rise buildings are only practical in a few scenarios. To develop a successful mid-rise building, there has to be demand for a property with more than three floors, which would otherwise be covered by garden homes. Because the footprint is much larger than a typical garden home, increasing the capacity of the property is necessary to generate any significant revenue.
YOU'RE WRONG!
Mid-rise buildings are only practical in a few scenarios. To develop a successful mid-rise building, there has to be demand for a property with more than three floors, which would otherwise be covered by garden homes. Because the footprint is much larger than a typical garden home, increasing the capacity of the property is necessary to generate any significant revenue.
The end of a down cycle provides an opportunity to do which of the following?
YOU'RE CORRECT!
At the end of a down cycle, you might find that your property has become inhabited with tenants generally associated with Class-C properties. During this period, it might be necessary to stop renting, take the loss on the income and reposition the property to a more adequate grade.
YOU'RE WRONG!
At the end of a down cycle, you might find that your property has become inhabited with tenants generally associated with Class-C properties. During this period, it might be necessary to stop renting, take the loss on the income and reposition the property to a more adequate grade.
What is the appeal of age restricted living?
YOU'RE CORRECT!
Age restricted living provides a common ground for people all of the same demographic. With age restricted living it is important that the building doesn't come off as too old.
YOU'RE WRONG!
Age restricted living provides a common ground for people all of the same demographic. With age restricted living it is important that the building doesn't come off as too old.
What is important to keep in mind when leasing student housing?
YOU'RE CORRECT!
College students generally only rent there homes over the course of a couple months. If you miss the window then there is a limited chance of you attracting a tenant.
YOU'RE WRONG!
College students generally only rent there homes over the course of a couple months. If you miss the window then there is a limited chance of you attracting a tenant.
How do high finish office buildings succeed?
YOU'RE CORRECT!
High finish office buildings are designed so that they appeal to large corporations. Instead of leasing just a portion of a floor, the entire floor is meant to be leased to tenants.
YOU'RE WRONG!
High finish office buildings are designed so that they appeal to large corporations. Instead of leasing just a portion of a floor, the entire floor is meant to be leased to tenants.
Why can good credit be misleading?
YOU'RE CORRECT!
Credit is a short-term indicator of the success of a company. Success is not permanent and it is important to note that a tenant with high credit still has a chance of failing.
YOU'RE WRONG!
Credit is a short-term indicator of the success of a company. Success is not permanent and it is important to note that a tenant with high credit still has a chance of failing.
Why aren't suburban office buildings built up?
YOU'RE CORRECT!
Where suburban office spaces are built, the land is cheaper than it is in urban areas. It is more logical to spread out horizontally and keep buildings low because that will save the developer money.
YOU'RE WRONG!
Where suburban office spaces are built, the land is cheaper than it is in urban areas. It is more logical to spread out horizontally and keep buildings low because that will save the developer money.
Why is it beneficial to place retail stores near other retail stores in downtown metropolitan areas?
YOU'RE CORRECT!
When there are multiple stores next to each other, shoppers generally make multiple stops before leaving. By placing a retail store near other retail stores, not only do you get customers who came to shop at your store, but also spillover customers who still wish to buy things.
YOU'RE WRONG!
When there are multiple stores next to each other, shoppers generally make multiple stops before leaving. By placing a retail store near other retail stores, not only do you get customers who came to shop at your store, but also spillover customers who still wish to buy things.
What is the appeal of a strip center?
YOU'RE CORRECT!
Strip centers are designed so that people can make grocery store and pharmacy stops and before or after be able to: get their hair done, get something to eat, etc. If the grocery store or pharmacy goes out of business it can harm the smaller businesses that lease in the strip center.
YOU'RE WRONG!
Strip centers are designed so that people can make grocery store and pharmacy stops and before or after be able to: get their hair done, get something to eat, etc. If the grocery store or pharmacy goes out of business it can harm the smaller businesses that lease in the strip center.
What is the danger in investing in a power center?
YOU'RE CORRECT!
Power centers are typically built so there are a relatively small number of huge boxes that are designed to be leased by big retail corporations like Costco, Target and Walmart. When there are empty boxes, since each one makes up such a large percentage of the property, you will see a significant decrease in revenue.
YOU'RE WRONG!
Power centers are typically built so there are a relatively small number of huge boxes that are designed to be leased by big retail corporations like Costco, Target and Walmart. When there are empty boxes, since each one makes up such a large percentage of the property, you will see a significant decrease in revenue.
Which of the following is a benefit to owning a mall?
YOU'RE CORRECT!
Mall owners have complete control over the store placement. As a result, the owner can strategically place stores to maximize spillover.
YOU'RE WRONG!
Mall owners have complete control over the store placement. As a result, the owner can strategically place stores to maximize spillover.
When working with retail real estate which of the following will not aid success?
YOU'RE CORRECT!
Since the price of rent does not influence sales, cheap rent will not aid the success of retail real estate. If retail is failing there are other ways to go about trying to increase success.
YOU'RE WRONG!
Since the price of rent does not influence sales, cheap rent will not aid the success of retail real estate. If retail is failing there are other ways to go about trying to increase success.
How can retail stores remain successful even though most shopping occurs online?
YOU'RE CORRECT!
In recent years this has become quite a problem. Half of all sales and nearly 100% of sale growth occurs online. In order to counter being wiped out by the internet, stores must constantly adapt to new trends in order to maintain a loyal customer base.
YOU'RE WRONG!
In recent years this has become quite a problem. Half of all sales and nearly 100% of sale growth occurs online. In order to counter being wiped out by the internet, stores must constantly adapt to new trends in order to maintain a loyal customer base.
Why do mixed-use buildings fail?
YOU'RE CORRECT!
In theory, mixed-use buildings are ideal for generating profit. But they come with many challenges that get magnified due to the building being composed of two asset classes. There are instances where mixed-use buildings have been successful, but the failures outweigh the successes.
YOU'RE WRONG!
In theory, mixed-use buildings are ideal for generating profit. But they come with many challenges that get magnified due to the building being composed of two asset classes. There are instances where mixed-use buildings have been successful, but the failures outweigh the successes.
