Monaco – Market Analysis:
It’s not just the beach and marina that makes Monaco special. A large part of its appeal is the income-tax-free-zone status all of which helped make Monaco a Top 20 Hot Market for Real Estate Investors.
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Loan-To-Value Ratio is a lending risk assessment ratio that financial institutions and others lenders examine before approving a mortgage. Typically, assessments with high LTV ratios are generally seen as higher risk and, therefore, if the mortgage is accepted, the loan will generally cost the borrower more to borrow or he or she will need to purchase mortgage insurance.
Calculated as: Mortgage amount divided by the Appraised Value
For example, Jim needs to borrow $92,500 to purchase a $100,000 property. The LTV ratio yields a value of about 92.5%. Since bankers usually require a ratio at a maximum of 75% for a mortgage to be approved, it may prove difficult for Jim to get a mortgage.
Similar to other lending risk assessment ratios, the LTV ratio is not comprehensive enough to be used as the only criteria in assessing mortgages.
Definition of Capitalization Rate
A rate of return on a real estate investment property based on the expected income that the property will generate. Capitalization rate is used to estimate the investor’s potential return on his or her investment. This is done by dividing the income the property will generate (after fixed costs and variable costs) by the total value of the property. If you want to get technical, it is basically the discount rate of a perpetuity.
Capitalization Rate = Yearly Income/Total Value
Also known as “cap rate”.
Capitalization Rate Explained
Capitalization rate is a good jumping-off point to quickly compare many investment opportunities, but it should not be the sole factor in any real estate investment decision. Many more factors need to be looked at such as the growth or decline of the potential income, the increase in value of the property, and any alternative investments available.
For example, if Stephane buys a property that will generate $125,000 per year and he pays $900,000 for it, the cap rate is: 125,000/900,000 = 13.89%.
But it gets a little more complicated. What if the property’s value rises to $2 million two years later? Now the cap rate is a less favorable 125,000/2 million = 6.25%. This is because Stephane could potentially sell the property for $2 million and use that money for an alternative investment.
Comparative Market Analysis (CMA)
An evaluation of similar, recently sold homes (called comparables) that are near a home intended to be bought or sold. It establishes a price estimate based on current market activity that can be used as a guide for pricing a home. Buyers, sellers, and real estate agents perform a CMA when they are preparing to buy or sell a home.
PITI is an acronym that stands for principle, interest, tax, and insurance (PITI), which are the four primary parts of a monthly mortgage payment.
Definition of ‘Amortization Schedule’
A complete schedule of periodic blended loan payments, showing the amount of principal and the amount of interest that comprise each payment so that the loan will be paid off at the end of its term. Early in the schedule, the majority of each periodic payment is interest. Later in the schedule, the majority of each periodic payment is put toward the principal.
If you know the term of a loan and the total periodic payment, an easy way to calculate an amortization schedule is to do the following: Starting in month one, multiply the loan balance by the periodic interest rate. This will be the interest amount of the first month’s payment. Subtract that amount from the total payment, which will give you the principal amount.
To calculate the next months’ interest and principal payments, subtract the principal payment made in month one from the loan balance, and then repeat the steps from above.
Definition of ‘Acceleration Clause’
A contract provision that allows a lender to require a borrower to repay all or part of an outstanding loan if certain requirements are not met. An acceleration clause outlines the reasons that the lender can demand loan repayment.
For example, a borrower who fails to make a payment or who breaks a covenant may be required to pay the lender the balance on a loan. In this case, the borrower is considered in breach of contract.
Acceleration clauses are most commonly found in mortgage and real estate loans. Since these loans tend to be so large, the clause helps protect the lender from the risk of borrower default.
MILAN — Prime Acquisition Corp., a special purpose acquisition company, and Bhn S.r.l a privately-held company, announced that they have entered into a binding Letter of Intent in connection with a proposed business transaction, valued at about $200 million.
Bhn S.r.l is a financial and strategic advisory boutique based in Milan. It is advising on the formation of a company, the target, which will exchange for ordinary shares an attractive portfolio of commercial real estate assets in Italy.
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With the exception of the Pirelli Tower and the stellar Torre Velasca by the architectural firm BBPR, both built in 1958, most buildings peter out at eight stories against an underwhelming canvas of hazy, gray sky. But necks are now craning for the new vertical shock in town: a spire of glass and steel shooting brazenly from the top of the Unicredit Tower, a 231-meter, or 758-foot, skyscraper that is the tallest building in Italy.
The building, part of a three-structure bank campus that houses 4,000 employees, opened officially in December. Love it or hate it — and in this image-conscious town, packed with award-winning architects and industrial designers, the jury is split. But aesthetics aside, the spire serves as a giant symbolic flag pole, clearly marking the spot of Milan’s newest, largest, most expensive and most ambitious real estate development.
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