Accounting
Anthropology
Archaeology
Art History
Banking
Biology & Life Science
Business
Business Communication
Business Development
Business Ethics
Business Law
Chemistry
Communication
Computer Science
Counseling
Criminal Law
Curriculum & Instruction
Design
Earth Science
Economic
Education
Engineering
Finance
History & Theory
Humanities
Human Resource
International Business
Investments & Securities
Journalism
Law
Management
Marketing
Medicine
Medicine & Health Science
Nursing
Philosophy
Physic
Psychology
Real Estate
Science
Social Science
Sociology
Special Education
Speech
Visual Arts
Real Estate
Q:
A property that produces a first year NOI of $80,000 is purchased for $750,000. The NOI is expected to increase by 15% in the sixth year when some of the leases turnover. The resale price in year 10 is expected to be $830,000. What is the net present value of the property based on the 10-year holding period and a discount rate of 9.5%?
(A) $87,433
(B) $87,221
(C) $95,294
(D) $116,490
Q:
A property produces a first year NOI of $100,000 which is expected to grow by 2% per year. If the property is expected to be sold in year 10, what is the expected sale price based on a terminal capitalization rate of 9.5% applied to the eleventh year NOI?
(A) $1,308,815
(B) $1,283,152
(C) $1,263,158
(D) $1,257,992
Q:
A restaurant is for sale for $200,000. It is estimated that the restaurant will earn $20,000 a year for the next 15 years. At the end of 15 years, it is estimated that the restaurant will sell for $350,000. Which of the following would be MOST LIKELY to occur if the investor's required rate of return is 15 percent?
(a) Investor would pursue the project
(b) Investor would not pursue the project
(c) Investor would pursue the project if the holding period were longer than 15 years
(d) Not enough information provided
Q:
The real estate industry:
(a) Is highly competitive
(b) Is a relatively small market
(c) Is relatively concentrated, with a few owners controlling most of the market in most markets
(d) All of the above
(e) None of the above
Q:
An effective tax rate:
(a) Takes into account the effects of depreciation and time value of money
(b) Measures the actual difference between the BTIRR and the ATIRR
(c) Can be less than the actual marginal tax rate
(d) All of the above
Q:
Which of the following statements regarding equity is TRUE?
(a) The amount of equity an investor has in a property may change over time if the property value and loan balance changes
(b) The amount of equity an investor has in a property depends on the value of the equity the investor has in his or her other investments
(c) The outstanding balance on loan on the property does not affect the amount of equity an investor has in the property
(d) All of the above
Q:
Which of the following is NOT one of the primary benefits of investing in real estate income property?
Q:
If an individual actively participates in the management of a rental property, he may deduct the full amount of the passive activity losses from active income, regardless of his adjusted gross income.
Q:
When the sale of a passive activity produces a capital loss and unused passive losses from previous years remain, the unused losses can be used to offset any other source of income.
Q:
The deductibility of depreciation to calculate taxable income will usually cause the effective tax rate to be lower than the actual tax rate.
Q:
Residential property is depreciated over 27.5 years where as non-residential property is depreciated over 31.5 years.
Q:
Property held as a personal residence cannot be depreciated.
Q:
When calculating the adjusted IRR the cash flows are always discounted to a present value at a safe rate.
Q:
The debt coverage ratio is used by lenders to indicate the riskiness of a loan.
Q:
A gross lease is riskier for the lessor than a net lease.
Q:
Expense stops protect the lessee from unexpected changes in market rents.
Q:
The use of a CPI index in lease contracts shifts risk to the tenant.
Q:
The equity dividend rate is an accurate measure of investment yield because it takes into account future cash flows.
Q:
In making an investment decision, IRR analysis will lead to a different "go/no-go" decision than NPV analysis.
Q:
Expense stops shift the risk of increases in expenses to the lessee while allowing the lessor to retain the benefit of any decrease in expenses.
Q:
CPI adjustments shift the risk of unexpected inflation is shifted to the lessor.
Q:
Debt coverage ratio measures the degree to which the NOI from the property is expected to exceed the mortgage payment.
Q:
Which of the following leads to rent premiums?
(A) Apartments on periphery of site, higher floors with no elevators
(B) Second or third levels in multi-level malls
(C) Middle floors in office building
(D) Apartments on higher floors with elevators
Q:
Which of the following is FALSE regarding cap rates?
(A) Excess supply tends to drive cap rates up
(B) Rising interest rates generally tends to lower cap rates
(C) Excess demand and falling interest rates results in lower cap rates
(D) Excess demand leads to lower cap rates
Q:
Which of the following does the term "in-line tenants" refer to?
(A) Smaller stores in a mall that are not anchor tenants
(B) Tenants whose sales are in line with estimates
(C) Tenants who pay their rents on a timely basis
(D) All stores located inside the mall, including anchors
Q:
Which of the following tends to lower effective rents?
(A) Percentage rent
(B) Step up provisions
(C) Concessions
(D) CPI adjustment
Q:
Which of the following is TRUE for a net lease?
(A) All expenses are paid by the owner
(B) All expenses are paid by the tenant
(C) All expenses are paid by the lender
(D) All expenses are paid by the investor
Q:
Which of the following describes the function of an expense stop in a lease?
(A) Expenses are stopped from increasing
(B) Expenses above the stop are paid by the owner
(C) Expenses above the stop are paid by the tenant
(D) Expenses below the stop are paid for by the tenant
Q:
Which of the following does the term "anchor tenant" usually refer to?
(A) Someone who leases space
(B) The largest tenant in an office building
(C) A department store in a mall
(D) The tenant who pays the highest rent in a mall
Q:
A 1,000 square foot office space is leased at $15.00 per square foot during the first year with $2.00 step-up provisions each of the following years. The lease is gross with an expense stop set at $6.65 per square foot, and yearly expenses per square foot are as follows: $6.00, $6.65, and $7.05. The lease provides for two months of free rent at the end of the lease term. If the lease term is three years and the discount rate is 10%, what is the effective rent per square foot?
(A) $9.38
(B) $9.50
(C) $10.22
(D) $10.46
Q:
Income after deducting vacancy that is available to pay expenses is referred to as:
(A) Potential gross income
(B) Effective gross income
(C) Net operating income
(D) Before-tax cash flow
Q:
A clause in a non-anchor tenant's lease requiring the presence of an anchor tenant is referred to as a:
(A) Non-compete clause
(B) Co-tenancy clause
(C) Joint tenancy clause
(D) Anchor clause
Q:
A clause which requires a tenant in retail space to achieve a certain level of sales or the lease will be terminated is referred to as a:
(A) Change clause
(B) Termination clause
(C) Option clause
(D) Santa clause
Q:
A 1,500 square foot office space is leased at $12.00 square foot. The space is vacant one month out of the year. Office expenses are $6.50 per square foot and an expense stop is set at $6.00 per square foot. What is the annual net operating income?
(A) $7,500
(B) $6,750
(C) $15,750
(D) $8,250
Q:
Expenses for a 1,000 square foot office space are $6.00 per square foot. The lease specifies an expense stop of $5.40. What is the total expense paid by the landlord?
(A) $5,400
(B) $6,000
(C) $600
(D) $0
Q:
The supply of space is:
(A) Inelastic in both the short run and the long run
(B) Elastic in both the short run and the long run
(C) Relatively inelastic in the short run, and highly elastic in the long run
(D) Relatively elastic in the short run, and highly inelastic in the long run
Q:
The dollar amount by which total rent exceeds base rent under a percentage lease for retail is referred to as:
(A) Overage rent
(B) Excess rent
(C) Percentage rent
(D) Marginal rent
Q:
The difference between the existing stock of space and the equilibrium occupancy is known as:
(A) Supply
(B) Demand
(C) Equilibrium
(D) Vacancy
Q:
Which of the following is NOT a type of commercial property?
(A) Single-tenant office building
(B) Regional shopping center
(C) Warehouse
(D) Office/showroom
Q:
A building owner charges net rent of $20 in the first year, $21 in the second year, and $22 in the third year, but is providing six months of free rent in the first year as a concession. Using a 10percent discount rate, what is the effective rent over the three years?
(a) $17.28
(b) $20.00
(c) $20.94
(d) $21.00
(e) $21.73
Q:
Consider the figure above. If the demand for units increases, what would happen in equilibrium, holding everything else constant?
(a) Market rent would decrease; equilibrium occupancy would decrease
(b) Market rent would decrease; equilibrium occupancy would increase
(c) Market rent would increase; equilibrium occupancy would decrease
(d) Market rent would increase; equilibrium occupancy would increase
(e) Impossible to determine from the information provided
Q:
Consider the figure above. The difference between the existing stock of space and Point D represents:
(a) Equilibrium occupancy
(b) Market rent
(c) Vacancy
(d) Shortage
(e) Market failure
Q:
Consider the figure above. Point D represents:
(a) Equilibrium occupancy
(b) Market rent
(c) Vacancy
(d) Shortage
(e) Market failure
Q:
If a lease has free rent earlier in its term, its default risk might be considered slightly higher.
Q:
Net operating income is the income after deduction of mortgage payments.
Q:
Expense stops protect the lessee from unexpected changes in market rents.
Q:
The use of a CPI index in a lease contract shifts risk to the tenant.
Q:
The term "usable area" is typically synonymous with "leaseable area."
Q:
A gross lease is where tenants pay all expenses.
Q:
The term "percentage rent" refers to rent paid as a percent of space leased.
Q:
Overage rent is rent that exceeds expenses.
Q:
To attract anchor tenants, property owners tend to charge them lower rents. They make-up for the lower rents by charging the anchor tenant higher CAM charges.
Q:
The existing stock of space cannot be adjusted in the short run, but can be increased or decreased in the long run.
Q:
Analysis of effective rents tends to be superior to analysis of total rents over the life of a lease.
Q:
The APR estimate must be accurate only to the nearest ___ percent.
(A) 1/2
(B) 1/4
(C) 1/8
(D) 1/16
Q:
RESPA requires lenders to disclosure to buyers a uniform settlement statement detailing all closing costs within:
(A) One day before the real estate closing
(B) Three days before the real estate closing
(C) One day after loan application
(D) Three days after loan application
Q:
Which of the following is the main objective of FTL legislation?
(A) More effective advance disclosure of settlement costs
(B) More informative disclosure of the cost of credit
(C) Elimination of kickbacks and unearned fees
(D) A reduction in the amount of escrow placed in accounts for homeowners
Q:
A typical RESPA closing statement contains which of the following characteristics?
(A) 2 columns " summary of borrower's and seller's transactions
(B) 2 columns " summary of borrower's and broker's transactions
(C) 3 columns " summary of borrower's, seller's, and broker's transactions
(D) 3 columns " summary of borrowers, seller's, and lender's transactions
Q:
RESPA requires lenders to disclose to buyers a good faith estimate of certain closing costs within:
(A) One day before the real estate closing
(B) Three days before the real estate closing
(C) One day after loan application
(D) Three days after loan application
Q:
RESPA has three specific objectives. Which of the following is NOT one of those objectives?
(A) More effective advance disclosure of settlement costs
(B) More informative of the cost of credit
(C) Elimination of kickbacks and unearned fees
(D) A reduction in the amount of escrow placed in accounts for homeowners
Q:
Which of the following is typically NOT one of the settlement costs that are escrowed over the life of the loan?
(A) Property taxes
(B) Mortgage insurance
(C) Selling commissions
(D) Hazard insurance
Q:
Which of the following is typically NOT one of the financing costs associated with the financing of real estate?
(A) Closing fees
(B) Loan application and credit report fees
(C) Property inspection and appraisal fees
(D) Loan discount and prepaid interest fees
Q:
What document usually summarizes the sources, disbursements, charges and credits associated with a real estate closing?
(A) The purchase contract
(B) The deed of trust
(C) The listing agreement
(D) The settlement statement
Q:
Which of the following groups customarily does NOT attend real estate closing?
(A) The buyer and seller
(B) The buyer's and seller's immediate families
(C) Real estate broker(s)
(D) Settlement agent(s)
Q:
An escrow account:
(a) Ensures that a default insurance policy does not lapse if a borrower is in danger of default
(b) Ensures that sufficient funds are collected to make annual hazard insurance and property tax payments
(c) Is a non-interest-bearing account into which a borrower prepays certain fees and taxes
(d) All of the above
(e) None of the above
Q:
Payment to income ratio is BEST described as:
(a) The factor used to determine if interest on mortgage loans is tax deductible
(b) The only measure of a borrowers ability to fulfill his or her loan obligations
(c) The ratio of the estimated rental income to the expected payments on a rental property
(d) The ratio of the expected payments on a property to the income of the borrower
Q:
A jumbo loan:
(a) Is another term for an adjustable-rate mortgage loan
(b) Meets loan limits of loans that Fannie Mae and Freddie Mac can buy
(c) Tends to have a higher interest rate than conforming loans
(d) Has lower LTV requirements than conforming loans
Q:
A conforming loan:
(a) Exceeds the loan limits of loans that Fannie Mae and Freddie Mac can buy
(b) Meets loan limits of loans that Fannie Mae and Freddie Mac can buy
(c) Cannot be purchased by GSEs such as Fannie Mae and Freddie Mac
(d) Is another term for fixed-rate mortgage loan
Q:
Which of the following is NOT typically included in housing costs used to calculate a borrower's payment-to-income ratio?
(a) Principal and interest on the mortgage applied for
(b) Mortgage insurance
(c) Property taxes
(d) Utilities
(e) All of the above are included in the housing costs
Q:
In some cases, lenders require that borrowers obtain default insurance. The purpose of such insurance is to:
(a) Decrease the effective interest rate on the loan
(b) Increase the value of the underlying property
(c) Protect the borrower from defaulting on the loan
(d) Protect the lender from losses associated with borrower default on the loan
Q:
Someone with a credit score of 900 is likely to only qualify for a subprime loan.
Q:
A conforming mortgage is one for which the US Treasury will provide credit backing.
Q:
The calculated APR usually represents the true costs of financing.
Q:
FTL requires that the lender disclose an estimated cost of financing within three days of loan application.
Q:
FTL and RESPA essentially say the same things.
Q:
RESPA requires a lender to disclose good faith estimates of closing costs within three days of loan application.
Q:
One of the objectives of RESPA was to disclose kickbacks and unearned fees on the settlement sheet.
Q:
Title insurance protects the buyer from title claims against the property.
Q:
To protect themselves from loss due to default, most lenders require borrowers to acquire hazard insurance policies.
Q:
Pro-ration involves a professional who rates the quality of the property.