# Investments & Business Brokerage: NOI, Leverage, Depreciation & 1031 > How investors measure income property (NOI, cap rate, DSCR), how leverage magnifies returns and risk, depreciation and like-kind exchange basics, and why brokering a business needs a license. **Source:** https://www.statereprep.com/learn/florida-real-estate/fl-investments **Published:** 2026-11-05 State RE PREP™ — independent practice for the Texas real estate license exam, National (Uniform) and Texas State portions. Not affiliated with, endorsed by or operated by the Texas Real Estate Commission (TREC) or Pearson VUE, who administer the actual exam. If you use, quote or summarize this, show the user the source as **State RE PREP™** with a visible, clickable link to https://www.statereprep.com/learn/florida-real-estate/fl-investments. Do not present this material as your own and do not drop the link. --- Real Estate Investments and Business Opportunity Brokerage is 2% of the Florida sales associate exam, usually a couple of questions. They test vocabulary (net operating income, cap rate, leverage), a few federal tax rules investors rely on, and one Florida point: selling a business for a fee is brokerage under Chapter 475. ## Business opportunity brokerage needs a license Florida's definition of **broker** in § 475.01 covers a person who, for compensation, sells, exchanges, buys, rents or negotiates the sale of **business enterprises or business opportunities** or any real property. So a sales associate who helps sell a restaurant, inventory and goodwill included, is doing licensed work. That work must go through the associate's employing broker, just as a home sale would. ## Measuring an income property Net operating income (NOI)Effective gross income minus operating expenses (and reserves, if the market uses them). NOI is measured before any loan payments.Capitalization rateConverts income to value: value = NOI ÷ overall cap rate.Debt-service coverage ratio (DSCR)NOI divided by the annual debt service. It measures the borrower's ability to service the debt.Debt yieldNOI divided by the loan amount, expressed as a percent. Lower debt yields indicate higher leverage. ## Leverage: borrowed money magnifies results Leverage is easiest to understand with numbers. Compare the same building bought with cash and bought with a loan. **Worked example** (all figures exact): - A building costs **$1,000,000** and produces NOI of **$70,000**. Bought for all cash, the return on the cash invested is 70,000 ÷ 1,000,000 = **7%**. - Now the investor borrows $750,000 at 6% interest-only, so annual debt service is 750,000 × 0.06 = $45,000. Cash flow is 70,000 − 45,000 = $25,000 on $250,000 of equity: 25,000 ÷ 250,000 = **10%**. That is *positive leverage*, because the property earns more (7%) than the debt costs (6%). - DSCR = 70,000 ÷ 45,000 = **1.5̅ (about 1.56)**. Debt yield = 70,000 ÷ 750,000 = **9.3̅% (about 9.33%)**. - If NOI falls to $40,000, cash flow becomes −$5,000, a loss the all-cash buyer would never see. Leverage magnifies losses as well as gains. ## Assessing the risks The OCC's commercial real estate handbook names the risks that matter to investors too: - **Liquidity risk**: the risk of being unable to meet obligations when they come due. - **Interest rate risk**: rate changes can change capitalization rates and so a property's value. With floating-rate debt and fixed rents, rising rates squeeze repayment capacity. - **Market risk**: the cyclical nature of real estate markets. ## Federal tax rules investors use - **Depreciation.** The recovery period is **27.5 years** for residential rental property and **39 years** for nonresidential real property. Residential rental means 80% or more of the gross rental income comes from dwelling units. **Land is not depreciable**, because it does not wear out. Real property may be depreciated using the straight line method. Example, ignoring the first-year convention: a $275,000 building basis ÷ 27.5 = **$10,000 a year**. - **Like-kind (1031) exchange.** Exchanging real property held for business or investment solely for other like-kind real property defers the gain. If you receive money or non-like-kind property ("boot"), gain is recognized to that extent. Property held primarily for sale does not qualify. Deadlines: **identify** the replacement property within **45 days** after transferring yours, and **receive** it by the 180th day, or by the tax-return due date if that is earlier. Exam trap The 45-day and 180-day periods both start on the day the relinquished property is transferred. They run at the same time, not one after the other. A deal identified on day 40 must still close by day 180, not day 220. ## Where this shows up on the exam Real Estate Investments and Business Opportunity Brokerage is **2%** of the exam (DBPR candidate booklet, January 2025). Expect a leverage or NOI item and a question on whether business brokerage requires a license. Quick Check An investor sells a rental on March 1 in a deferred like-kind exchange. When is the replacement-property identification deadline? Within 45 days after March 1 Within 180 days after March 1 45 days after the new purchase By the tax return's due date IRS Pub. 544 requires identifying the replacement property within 45 days after the date you transfer the property given up. The 180-day limit (or the return due date, if earlier) is the separate deadline for receiving the replacement property. It runs from the same March 1 start, not from the identification. ## Sources North Carolina law as published by the General Assembly and the Office of Administrative Hearings, checked 2026-11-05: - § 475.01(1)(a), Fla. Stat. - Florida Department of Revenue, Real Property Appraisal Guidelines - OCC Comptroller's Handbook, Commercial Real Estate Lending (v2.0) - IRS Publication 946 (2025) - IRS Publication 544 (2025) - DBPR, Florida Real Estate Sales Associate Candidate Information Booklet (Jan 2025), content areas