Real Estate Practice Chapter 35 An Income Propertys Operating Data

Real Estate Practice Chapter 35 An Income Property's Operating Data (APOD) Flashcards Deposits into an impound account are NOT a mortgage charge or an operating expense.True Annual Property Operating Data (APOD)A worksheet used when gathering income and expenses on the operation of an income producing property, to analyze its suitability for investment income approachan appraisal method used to estimate the value of the property based on the income and expenses it produces, determined by dividing the net operating income by the capitalization rate Net Operating Income (NOI)Rental Income - Operating Expenses = NOIRepresents the annual return the property delivers to the owner Impounds for Taxes and InsuranceImpounds for Taxes and Insurance. Many lenders require that borrowers provide a reserve fund to meet future real estate taxes and property insurance premiums. This fund is called animpound, trust or escrow account.When the mortgage or deed of trust loan is made, the borrower starts the reserve by depositing funds to cover the amount of unpaid real estate taxes. If a new insurance policy has just been purchased, the insurance premium reserve will be started with the deposit of one-twelfth of the insurance premium liability. The borrower's monthly loan payments will include principal, interest, tax and insurance reserves (PITI) and other costs, such as flood insurance or homeowners' association dues. RESPA (the federalReal Estate Settlement Procedures Act) limits the total amount of reserves that a lender may require to the actual amount of each bill plus an additional two months.if the seller or their property manager are the source of the information on the property's operations, and the seller's

agent has no reason to believe the data is false:

the seller's agent has NO DUTY to prospective buyers to investigate the truthfulness/accuracy of the information.However, the actual source of the data needs to be identified by disclosure after receiving an Annual Property Operating Data sheet

(APOD) from the seller's agent, the buyer is advised to:

-review tenant files-confirm utility payments-get quotes on hazard insurance premiums and taxes the only known sources of data for the APOD figures which

the seller's agent may draw on are the:

-owners actual operating records of the property-operations of comparable properties to verify the data on an APOD, the buyer's agent: reviews the seller's records for operating expenses, rent rolls, leases and tenant estoppel certificates.

The APOD contents:-the estimated NOI, for setting the price to be paid and the

mortgage amounts which may be serviced by the income generated by the property-the spendable income, for

providing a cash-flow cushion reflected by the amount of the NOI remaining after servicing the mortgage financing; and-the income tax consequences the prospective buyer is likely to experience during the first year of ownership due to allowable deductions of interest on trust deed mortgages and IRS depreciation schedules