A Simple Stress Test
4.10
50 Reviews
Participants examine break-even measures, focusing on how vacancy rates impact net operating income and debt service, comparing actual versus stabilized values during market downturns.
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Certificate
0.5 Credit
Cost
1 hr.
Duration
n/a
Prep Time
1
Quiz
Overview
In this short self-study course, participants review three common break-even measures with a primary focus on testing how far vacancy rates can increase before net operating income - an income producing property's cash flow - falls to the level of existing debt service on the property. In doing so, they examine the different messages about an income producing property's ability to withstand a market downturn based on actual net operating income versus net operating income using stabilized values embedded in the appraisal report.
Who Should Take This Course
Analysts and lenders interested in reviewing the methodology for computing break-even values for rental rates and vacancy rates as well as examining the differences in break-even estimates based on actual net operating income in contrast to stabilized or "what if" net operating income assumed in the appraisal report.
Prerequisites
General familiarity with an operating statement for an income producing property.
Objectives
By the end of the course, participants will be able to:
- Identify three common measures of stress on net operating income that an income producing property must successfully withstand in order to service the property's interest-bearing debt from property cash flow.
- Apply the methodology for computing a break-even vacancy rate using both existing and stabilized values for rental rates and operating expenses and assess the resulting messages about the property's sensitivity to rising vacancy rates.
- Explain the importance of existing net operating income - in contrast to stabilized net operating income - in properly servicing interest-bearing debt on an income producing property.
Materials(access provided with registration)
- Credit Refresher on A Simple Stress Test
- Online Quick Hit Review Quiz
- Webinar Poll Solutions
- Exercise Solutions
