Q&A Hero

Q: If the lender has agreed to offer you a loan with a loan-to-value ratio of 85%, what is the size of the loan if the purchase price of the home is $500,000?A. $75,000B. $400,000C. $425,000D. $588,235

Q: An oral contract promising to perform a service by a date 24 months in the future is enforceable.

Q: Suppose you plan to put a 20% down payment on a house and obtain a mortgage loan that is less than the size limit on conforming loans ($417,000) to finance the remainder of the purchase. Based on your understanding of the loan-to-value ratio, what is the maximum price that you could pay for a home with these restrictions in mind?A. $333,600B. $500,400C. $521,250D. $2,085,000

Q: To be enforceable, all contracts must be in writing.

Q: Given the following information, calculate the capitalization rate for the following apartment complex. Number of apartments: 15; Market Rent (per month): $1,000; Vacancy and Collection Loss: 10% of potential gross income; Operating Expenses: 5% of effective gross income; Capital Expenditures: 10% of effective gross income; Acquisition Price: $1,710,000.A. 8.1%B. 9.0%C. 9.5%D. 10.5%

Q: A six month lease to rent an apartment for $1000.00 per month must be in writing to be valid

Q: Given the following information, calculate the debt yield ratio on the following commercial property. Estimated Net Operating Income in the first year: $250,000, Loan amount: $2,047,500, Purchase price: $2,730,000A. 4.8%B. 12.2%C. 68.6 %D. 75.2 %

Q: A party to a contract is said to be discharged when that party is relieved from all further responsibility of performance under a contract.

Q: Given the following information, calculate the after tax-cash flow for this property.Debt Service: $45,000; First-year NOI: $91,750; Tax liability: 25% of Before Tax Cash Flow.A. $23,812.50B. $35,062.50C. $68,812.50D. $80,500.00

Q: A loan agreement for $50,000 must be in writing to be valid.

Q: Suppose the operating agreement of an LLC insists that all investors receive their pro rata share of all cash flows when a property is liquidated from the portfolio. If all 15 investors contributed an equal amount of equity in establishing the LLC, each investor should receive how much from the liquidation of a property valued at $3,500,000.A. $233,333B. $350,000C. $3,500,000D. $52,500,000

Q: A sales contract between merchants must always be signed by the party being sued to be valid.

Q: Given the following information, calculate the loan-to-value ratio for this property.Loan amount: $450,000, Interest rate: 7.5%, Acquisition price: $550,000A. 0.18B. 0.82C. 0.99D. 1.22

Q: The statute of frauds writing requirement does not apply to executed or partially executed contracts.

Q: Given the following information, calculate the net income multiplier for this property. First-year NOI: $18,750, Acquisition price: $150,000, Equity Investment: 20%.A. 0.1B. 1.6C. 8.0D. 12.5

Q: Contracts to purchase land may be oral of for less than one year and for less than $500.00.

Q: Given the following information, calculate the debt coverage ratio for this investment. Potential gross income: $120,000, Vacancy rate: 9%, Net operating income: $57,900, Operating expenses: $51,300, Acquisition Price: $520,000, Debt service: $40,000.A. 0.69B. 1.45C. 2.73D. 8.29

Q: If you order five pairs of jeans from a catalogue but only three pair are delivered, the contract price will be adjusted and the contract terminates based on breach of contract.

Q: Given the following information, calculate the operating expense ratio for this property. Potential gross income: $120,000, Vacancy rate: 9%, Net operating income: $57,900, Operating expenses: $51,300.A. 34%B. 43%C. 47%D. 53%

Q: The Parole Evidence Rule determines when criminals may be let out of jail early.

Q: Given the following information, calculate the effective gross income multiplier for the specific investment. Effective gross income: $49,500, First-year NOI: $18,750, Acquisition price: $520,000, Equity Investment: 20%.A. 0.036B. 0.095C. 10.5D. 27.7

Q: All states require that insurance policies be written.

Q: Given the following information, calculate the equity dividend rate for this investment. First-year NOI: $18,750, Before-tax cash flow: $11,440, Acquisition price: $520,000, Equity Investment: 20%.A. 2.2%B. 3.6%C. 11.0%D. 18.02%

Q: An exchange of e-mails can be enough evidence of a writing satisfying the Statute of Frauds.

Q: Given the following information, calculate the going-in capitalization rate for the specific property. First-year NOI: $18,750, Acquisition price: $150,000, Equity Investment: 20%.A. 2.5%B. 12.5%C. 15.6%D. 62.5%

Q: Complete performance discharges a party to a contract.

Q: Given the following information, calculate the total amount of annual operating expenses for this income-producing property. Lawn care: $10,000, Property taxes: $24,000, Maintenance: $35,000, Janitorial: $25,000, Security: $32,000, Debt service: $145,000.A. $102,000B. $126,000C. $247,000D. $271,000

Q: If a contract is silent as to delivery, there is a presumption that the buyer is responsible for picking up the goods at the seller's location.

Q: Given the following information, calculate the cash down payment required to purchase the specific property. Purchase Price: $500,000, Loan Amount: 80% of purchase price, Up-front financing costs: 2.5% of loan amount.A. $90,000B. $110,000C. $136,250D. $200,000

Q: Oral contracts are generally as enforceable as written ones.

Q: Unlike the debt coverage ratio, the debt yield ratio (DYR) is not affected by the interest rate or amortization period of the loan; the DYR is simply a measure of how large the NOI is relative to the loan amount. Lenders who rely on this ratio are typically willing to accept a minimum DYR ofA. 10%B. 20%C. 60%D. 80%

Q: Without permission, a duty that involves skill, character, or training cannot be delegated. Explain why.

Q: The loan-to-value ratio measures the percentage of the acquisition price (or current market value) encumbered by debt. To protect their invested capital in the event that property values do fall, commercial mortgage lenders generally require that the senior mortgage not exceed approximately what percentage of the acquisition costs?A. 60%B. 70%C. 80%D. 90%

Q: Ptomaine is a chef who has opened a new restaurant. He agrees with Bob the Baker that Bob will deliver 10 dozen hamburger and hotdog buns each morning at 6:00 a.m. as long as he doesn't call to cancel the next morning's delivery by 6:00 p.m. the evening before. This goes on for about ten days when Ptomaine realizes at 10:00 p.m. one evening that he has a surplus of buns. At 6:00 a.m. the next morning he refuses to accept the morning delivery. Discuss whether a contract exists from a common law and a UCC point of view.

Q: Helpful in assessing the risk of lending to investors for particular projects, which of the following calculations measures the income-producing ability of the property to meet operating and financial obligations?A. Profitability ratiosB. Income multipliersC. Financial risk ratiosD. Income tax multipliers

Q: Why do contracts have to be for a legal purpose?

Q: Single year return measures and ratios can be categorized into three groups: profitability ratios, multipliers, and financial ratios. All of the following are considered financial ratios EXCEPT:A. Capitalization ratioB. Operating Expense ratioC. Loan-to-value ratioD. Debt yield ratio

Q: Name the traditional three groups that receive contractual protection regarding their capacity to contract and why are they afforded such protection under the law?

Q: Profitability ratios, income multipliers, and financial risk ratios can be used to provide a quick assessment of a property's relative value. Which of the following ratios measures the overall income-producing ability of the property?A. Capitalization rateB. Equity dividend rateC. Debt coverage ratioD. Operating expense ratio

Q: Why might a company prefer not to use the mailbox (deposited acceptance) rule?

Q: The going-in capitalization rate can vary significantly by property quality. Which of the following classes of properties within a particular property type would be expected to have the highest cap rates?A. Class A propertiesB. Class B propertiesC. Class C propertiesD. Cap rates would be equal across all classes within the same property type

Q: What is a novation and how does it differ from an assignment of a contract?

Q: The measure of cash flow most relevant to investors in income-producing real estate is the after-tax cash flow (ATCF) from property operations. Therefore, it is important to know that the maximum federal income tax rate on individuals as of 2012 is:A. 25%B. 30%C. 33%D. 35%

Q: What is a covenant not to compete and under what conditions are they valid?

Q: The key to meaningful valuations in real estate is to use defensible cash flow estimates. All of the following statements are true in regards to generating accurate cash flow estimates EXCEPT:A. Investors should include only those sources of income and expenses that relate directly to the income producing ability of the property.B. Investors should only consider recent events, rather than long-term trends when evaluating revenue and expense items.C. Investors should obtain information about comparable properties whenever possible.D. Investors should take into consideration local zoning, land use, and environmental controls that may impact the future flow of funds.

Q: How do legal remedies differ from contractual remedies regarding breach of contract?

Q: In determining a property's before-tax cash flow from operations (BTCF) and net operating income (NOI), it is important to understand how each accounts for the use of financial leverage in its calculation. Which of the following statements is true in regards to how these two measures account for the use of financial leverage?A. BTCF and NOI are both levered cash flowsB. BTCF is an unlevered cash flow, while NOI is a levered cash flowC. BTCF is a levered cash flow, while NOI is an unlevered cash flowD. BTCF and NOI are both unlevered cash flows

Q: With regard to remedies available for breach of contract, when would compensatory and consequential damages apply and when might an injured party seek specific performance?

Q: Prior to determining the treatment of capital expenditures in the calculation of NOI, it is important to distinguish these costs from operating expenses. In contrast to operating expenses, capital expenditures:A. add to the market value of the propertyB. are deductible for tax purposes in the year in which they are paid.C. are necessary to keep the property operating and competitive in its local market.D. may include minor repairs that do not add to the property's useful life.

Q: What are the five elements of a contract?

Q: In calculating the net operating income (NOI) of a property, the "above-line" treatment of capital expenditures implies:A. capital expenditures are excluded from the calculation of NOI.B. capital expenditures are included in the calculation of NOI.C. capital expenditures are set equal to NOI.D. capital expenditures are divided by NOI.

Q: Warren tells Brandie, (21 years old) that he will pay her $1,000 if she gives up smoking for one year. Brandie refrains from smoking for one year but warren feels that he is not required to pay. Which of the following statements is correct:A.Brandie is entitled to payment because a promise is a promise and consideration has nothing to do with the agreement.B.Warren does not have to pay because he received no actual benefit from the agreement.C.Warren does not have to pay because Brandie suffered no detriment because she is now healthier.D.Warren does have to pay because Brandie acted by giving up a legal right based on the agreement.

Q: In an analogy to the stock market, the net operating income of a property can be viewed as which of the following?A. Annual dividend expected to be produced by the propertyB. Annual return on the value of the propertyC. Market value of the propertyD. Price-earnings ratio of the property

Q: Jon works for a major bank. The revised employee handbook that he received five years ago says that all employees with 25 years of service will receive a gold watch. He is about to hit 25 years of service and has announced his retirement. His manager tells him that the company, based on his years of service, will throw him a party and present him with a gold watch. Jon retires on his 25th anniversary and his manager announces that the company will not throw the party or give him the watch. A.Because of past consideration, no party or watch is owed. B.The company is required to throw the party but no watch is owed. C.The company is required to present him with the watch but no party is owed. D.The company is required to present him with the watch and throw him the party.

Q: According to the mailbox rule: A.A contract is formed when the offer is mailed. B.A contract is formed when the offer is received. C.A contract is formed when the acceptance is received. D.A contract is formed when the acceptance is mailed.

Q: In making single-asset real estate investment decisions, the first pass often involves calculating a series of returns, ratios, and multipliers. Which of the following is often cited as a limitation associated with this type of analysis?A. they are difficult to calculateB. they are complex to understandC. they fail to incorporate cash flows beyond the first year of the analysisD. they are rarely used by industry professionals

Q: A minor can disaffirm a contract until: A.Age 18. B.Age 21. C.Age 18 and a reasonable time thereafter. D.The day before his or her 18th birthday.

Q: Up until the market for these instruments collapsed in 2008, which of the following was the fastest-growing source of long-term commercial mortgage funds from 2002-2007? A. Real estate investment trusts (REITs) B. Commercial mortgage backed securities (CMBS) C. Construction loans D. Residential mortgage backed securities (MBS)

Q: At this moment, your contract with your school is: A.Implied, unilateral and executed. B.Express, bilateral and executory. C.Implied, bilateral and executory. D.Quasi, unilateral and executed.

Q: The choice of ownership form for pooled equity investments can also depend on the desire to avoid personal liability. Which of the following ownership structures suffers from the major disadvantage of unlimited liability for all investors? A. C Corporation B. Subchapter S Corporation C. General Partnership D. Limited Partnership

Q: Which of the following is not a necessity for a minor: A.Medical care. B.Clothing. C.Shelter. D.Elective surgery.

Q: Section 1031 of the Internal Revenue Code permits investors to defer some or all of the taxable gain that would ordinarily be due on the sale of a property if they exchange for "like-kind" property. In order to avoid income taxes, many investors attempted to make use of this tax code when disposing of commercial real estate assets. This led to the reemergence of which of the following forms of ownership in commercial real estate? A. General Partnership B. Limited Liability Company C. Tenancy-in-common D. Limited Partnership

Q: If an assignor assigns the same rights to two different assignees: A.The assignee who first received the assignment has priority in receiving payment from the obligor. B.The assignee who first notifies the obligor of the assignment has priority in receiving payment from the obligor. C.The obligor must pay both assignees equal amounts but no more than what would have been paid had there only been one assignment. D.The assignment becomes void and the original contract remains in force.

Q: Ownership forms for pooled equity investment can differ in terms of how the entity's cash flows are distributed to its investors. Which of the following ownership structures requires cash flows to be allocated to each shareholder in proportion to his or her ownership of the entity, thereby preventing special allocations to multiple classes of investors? A. Subchapter S Corporation B. General Partnership C. Limited Partnership D. Limited Liability Company

Q: Consideration is not needed for: A.Real estate sales. B.Service contracts. C.Firm offers. D.Consideration is always required in a contract.

Q: The choice of ownership form for pooled equity investments depends heavily on federal tax considerations. Which of the following ownership structures suffers from the major disadvantage of double taxation? A. C Corporation B. Subchapter S Corporation C. General Partnership D. Limited Liability Company

Q: Builder and Owner agree that Builder will erect a fence for Owner for $1,500. Builder claims that the fence is taking longer than Builder expected, so Owner must pay Builder $500 more or Builder will not complete the fence. Owner, needing the fence completed, agrees to the additional $500. Builder completes the fence. Owner owes Builder: A.$1,500. B.$2,000. C.$1,000. D.$1,750.

Q: As of 2011, nearly 88% of private commercial real estate equity was owned by "noninstitutional investors." Which of the following investor categories represents the most common form of noninstitutional ownership? A. Pension funds B. Sole proprietorship C. "local" syndications and private equity funds D. Life insurance companies

Q: An agreement to settle a disputed debt is called a/an: A.Mitigation. B.Promissory estoppel. C.Accord and satisfaction. D.Acclaim and satisfaction.

Q: At the end of 2011, commercial banks and other financial institutions collectively owned $51 billion in commercial real estate equity. The vast majority of these holding are the result of which of the following types of investment by these institutions? A. Direct equity investment through private market purchases B. Indirect investment through real estate securities C. Commingled real estate funds D. Real estate obtained as a result of borrower default and foreclosure.

Q: When fund managers collect contributions from multiple sources and "commingle" them to purchase properties, this is referred to as the use of commingled real estate funds. Which of the following institutional investors utilize commingled real estate funds for approximately one-half of their investments in real estate? A. Investment banks B. Life insurance companies C. Real estate advisory firms D. Pension funds

Q: Which is valid consideration: A.Prior consideration. B.Disproportionate consideration. C.Unilateral consideration. D.The promise of a gift.

Q: The courts enforce the concept of ________ contracts to remedy situations of unjust enrichment. A.Quasi. B.Implied. C.Divisible. D.Bilateral.

Q: Though difficult to accurately measure, the market value of U.S. real estate held by non-real estate corporations is estimated to exceed $10 trillion. All of the following are examples of noninvestible commercial real estate EXCEPT: A. Medical office buildings owned by the hospital B. Branch offices owned by the bank C. Plant and equipment owned by steel corporations D. Assembly plant building owned by a group of investors as part of an LLC

Q: There are two major types of REITs: Equity REITs and Mortgage REITs. Each differs in terms of what they invest in. Which of the following choices best describes the investment focus of an Equity REIT? A. Invests a significant percentage of their assets in both properties and mortgages B. Invests primarily in and operates commercial properties C. Purchases mortgage obligations D. Purchases ownership interests in shares of pension funds and life insurance companies

Q: Tony's Carpets wants to charge $9.80 a yard for installed carpet for Bookstore, but accidentally states $8.90 a yard in the bid. Serenity Bookstore accepts Tony's bid. Tony's Carpets made a _______ mistake. A.Bilateral. B.Unilateral. C.Mutual. D.Rescission.

Q: There are a set of restrictive conditions that REITs must satisfy on an ongoing basis in order to maintain their special tax status. All of the following statements regarding the main restrictions are true EXCEPT: A. At least 100 investors must own a REIT's shares B. No five investors can own more than 50 percent of a REIT's shares C. At least 75 percent of the value of a REIT's assets must consist of real estate assets D. A REIT must distribute at least 75% of its taxable income to shareholders in the form of dividends.

Q: Which statement is false concerning silence as a method of acceptance: A.Automatic re-orders in a contract are valid. B.Parties' course of dealing may allow silence as a valid acceptance. C.If the offer states that silence means acceptance, then the offeree must respond or there will be a valid contract. D.The UCC allows conduct of the parties to give rise to a contract.

Q: In contrast to public markets, private markets are characterized by individually negotiated transactions that take place without the aid of a centralized market. Therefore, private markets will generally have: A. High transaction costs and high liquidity B. High transaction costs and low liquidity C. Low transaction costs and high liquidity D. Low transaction costs and low liquidity

Q: Under the UCC, the mirror image rule treats new or different terms in the acceptance as part of the contract unless: A.The offer expressly limits the acceptance to the original terms. B.The proposed terms materially alter the contract. C.The offeror rejects the proposed terms. D.All of the above.