Development & Feasibility Analysis Flashcards
6 cards from real REA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Development & Feasibility Analysis flashcards as text
What does 'floor area ratio' (FAR) determine in real estate development?
Answer: The maximum total building square footage permitted relative to the lot size
FAR limits the total floor area that can be developed on a site by multiplying the lot area by the FAR; it is a primary zoning control on development density.
What is a 'tax increment financing' (TIF) district and how does it benefit real estate developers?
Answer: A public financing mechanism that captures future property tax growth from new development to fund infrastructure costs
A TIF district uses the incremental property tax revenue generated by new development to repay bonds issued to fund infrastructure, reducing development costs.
What is the primary challenge of developing in an 'opportunity zone' under the US Tax Cuts and Jobs Act?
Answer: Capital must be deployed within strict timelines and substantial improvement requirements must be met to qualify for tax benefits
Qualified Opportunity Zone developments must be substantially improved within 30 months of acquisition and meet other IRS requirements to qualify for capital gains deferral and exclusion.
What does 'entitlement' refer to in real estate development?
Answer: The government approvals required to develop a property for a specific use, including rezoning and permits
Entitlements are the governmental approvals — including zoning changes, variances, and use permits — that authorize a specific development program on a site.
What is a 'cost segregation study' and why is it valuable to real estate developers?
Answer: An engineering analysis that reclassifies building components to shorter depreciation lives, accelerating tax deductions
Cost segregation reclassifies portions of a building from 39-year to 5-, 7-, or 15-year depreciation, significantly accelerating tax deductions and improving after-tax returns.
In development pro forma analysis, what is the difference between 'gross' and 'net' rentable area?
Answer: Gross area is the total building area including common spaces; net rentable area excludes common areas and is the basis for tenant leases
Net rentable area (NRA) is the area on which tenant rents are based and excludes common areas; gross area includes all building space including lobbies, corridors, and mechanical rooms.