Q&A Hero

Q: Which of the following steps normally would be used in the cost approach to value? A. Estimate net operating income of the property B. Multiply accrued depreciation by the assessed cost C. Add actual construction costs to the land value D. Subtract accrued depreciation from the replacement cost

Q: What does an appraisal tell about the value of a property? A. An appraisal calculates value B. An appraisal confirms value C. An appraisal estimates value D. An appraisal determines value

Q: Which of the following factors is NOT part of the definition of market value? A. Payment is made in terms of cash in U.S. dollars or a comparable financial arrangement B. The property has been on the open market for less than a year C. Buyer and seller are typically motivated D. Price is not affected by special or creative financing

Q: CPI adjustments are used to adjust rents by all or part of the increase in the Consumer Price Index.

Q: Which is not true about 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 does the term "in-line tenants" refer to? A. Smaller stores in a mall that are not anchor tenants B. Tenants who's sales are in line with estimates C. Tenants who pay their rents on a timely basis D. Stores that are located inside the mall including anchors

Q: What is does an expense stop do in a lease? A. Stops expenses 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 does the term anchor tenant usually refer to? A. Someone who leases space at a marina B. The largest tenant in an office building C. A department stores in a mall D. The tenants who pay the highest rent in a mall

Q: A 1,000 square foot office space is leased at $15.00/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/square foot, and yearly expenses/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/square foot? A. $9.38 B. $9.50 C. $10.22 D. $10.46

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 tenent in retail space to achieve a certain level of sales of the lease will be terminated is referred to as a A. Kickout clause B. Termination clause C. Option clause D. Santa clause

Q: Which of the following properties is NOT a type of commercial property? A. Single-tenant office building B. Regional shopping center C. Warehouse D. Office/showroom

Q: A typical RESPA closing statement has which of the following characteristics? A. 2columns " Summary of borrower's and seller's transactions B. 2columns " Summary of borrower's and broker's transactions C. 3columns " Summary of borrower's, seller's, and broker's transactions. D. 3columns " Summary of borrowers, seller's, and lender's transactions.

Q: RESPA had three specific objectives. Which of the following was 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 typically is 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 typically is 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: Which of the following customarily do NOT attend real estate closing? A. The buyers and sellers B. The buyer's and seller's immediate family C. Real estate broker(s) D. Settlement agent(s)

Q: One of the following is not tax deductible for homeowners: A. points in mortgage loans B. mortgage interest C. property taxes D. maintenance expenses

Q: When considering the federal income tax treatment for housing, the following is tax deductible: A. loan amortization B. interest on mortgage loans C. insurance D. none of the above

Q: The appraised value of a property usually represents: A. theactual value of the property. B. theactual selling price of the property. C. theactual opinion of an appraiser D. theactually replacement value of the property

Q: Which of the following is TRUE regarding the incremental Cost of Borrowing : A. It should be less than the rate for a first mortgage B. It should be compared to the cost of obtaining a second mortgage C. It is used to calculate the APR for the loan D. It is independent of Loan-to-Value Ratio

Q: Given that every other factor is equal, which of the following ARM will have lowest expected cost? A. ARM with payment caps and negative amortization. B. ARM with interest rate caps. C. ARM with longer Adjustment interval. D. ARM with no caps or limitations.

Q: Which of the following are disadvantages of PLAMs? A. Lenders face high levels of interest rate risk under PLAMs. B. Fewer homebuyers are likely to qualify for financing using PLAMs in comparison to CPMs. C. The price level used to index PLAMs is measured on an ex post basis and historic prices may not be an accurate reflection of future price. D. All of the above.

Q: Under which scenario is negative amortization likely to occur? A. A Above. B. B Above. C. C Above. D. D Above.

Q: With which loan does the lender have the lowest interest rate risk? A. Loan 1 B. Loan 2 C. Loan 3 D. Loan 4

Q: Which loan is a FRM? A. Loan 1 B. Loan 2 C. Loan 3 D. Loan 4

Q: Which loan should have the lowest initial interest rate? A. Loan 1 B. Loan 2 C. Loan 3 D. Loan 4

Q: With a reverse annuity mortgage the borrower receives payments from the bank.

Q: You are able to calculate the present value of an annuity by understanding the following relationship: FV = PV (1+I)

Q: Present Value Factor for Reversion of $1 Using only the information above, approximately how much would you pay today for an investment that pays $0 annual interest, but earns 8% interest over the next four years and has a face value at maturity of $13,500? A. $8,000 B. $9,000 C. $10,000 D. $11,000

Q: Using only the information above, what would the IRR be for an investment that cost $500 in period 0 and was sold for $750 in period 5? Present Value Factor for Reversion of $1 A. Between 6% and 7% B. Between 7% and 8% C. Between 8% and 9% D. Between 9% and 10%

Q: When Seller financing is not used? A. The seller desires to take advantage of the installment method of reporting the gain from sale B. The buyer does not qualify for long term mortgage credit because of low down payment or difficulty meeting monthly payments C. Third-party mortgage financing is less expensive or easily available D. The seller desires to artificially raise the price of the property by offering a lower-than-market interest rate on the mortgage

Q: Which of the following statements is true about foreclosure? A. In judicial foreclosure, property subject to attachment and execution is limited to the mortgaged property B. If the sale of the mortgaged property realizes a price above the claims of the mortgage and expense of the sale, the balance goes to the mortgagor C. Redemption can be accomplished by paying 95% of the debt, interest and costs due to mortgage D. None of the above

Q: Which of the following is NOT true in regard to a tax sale? A. An accurate and complete description of the property is required to be posted for possible purchasers before the sale. B. The property owner may not have had a court appearance through due process, thus creating a cloud on the title. C. The line of authority for the sale may not be clear. D. The purchaser is usually expected to pay all delinquent taxes at the time of sale.

Q: An historical summary of the publicly recorded documents that affect the ownership of a property is know as a(n): A. Estate B. Deed C. Abstract of title D. Lien

Q: Which of the following is NOT a good method of title assurance?A. Seller provides a warranty in the deed.B. An attorney searches recorded documents.C. Title insurance is purchased.D. Seller provides a quitclaim deed.

Q: An office complex was acquired for $1,500,000 in 2014. Cash flows to the investor were received at the end of each year, as follows: 2014 - $250,000; 2015 - $400,000; 2016 - $600,000; 2017 - $600,000. The property was sold for $1,850,000 at the end of 2017. Calculate the IRR for this property. A) 7.8% B) 27.7% C) 31.6% D) 34.3%

Q: ________ funds mostly invest in existing operating properties that are stable, with low vacancy and current cash flows and are located in major metropolitan areas. A) Core B) Core plus C) Value-Added D) Opportunistic

Q: Well-known market indexes, that are adjusted by a margin, serve as which of the following in relation to the expected returns of a fund: A) Target return B) Opportunity C) Benchmark D) TWR

Q: What is the expected return for a real estate investment fund with a Beta of 1.87, given a risk free rate of 2.7% and an expected return of 11.2% for the market? A) 18.6% B) 11.2% C) 15.9% D) 2.7%

Q: Which of the following is NOT a measure of risk related to real estate investment funds? A) Tracking error B) Beta C) TWR D) Jensen's Alpha

Q: For real estate investment funds in which the manager has little control over the flow of cash into and out of the fund, the preferred performance measure is ________. A) NPV B) IRR C) TVM D) TWR

Q: A property was acquired for $950,000 and then produced cash flows of $100,000, $120,000, $135,000, $135,000, and $125,000 at the end of years one through five, respectively. The property was then sold for $1,200,000 at the end of the fifth year. What was the internal rate of return for this investment? A) 16.0% B) 16.5% C) 15.5% D) 12.8%

Q: ________ is the rate that causes the present value of all cash flows from a property (including its resale value) to be equal to the original purchase price of the property. A) IRR B) NPV C) TWR D) TVM

Q: When comparing investment returns at the fund level against those at the property level, the difference between them is referred to as ________. A) fund drag B) performance lag C) leverage drag D) administrative drag

Q: Fund flows that occur within a quarterly reporting period are referred to as ________ cash flows. A) inter-period B) intra-period C) regular D) irregular

Q: If a fund manager has the opportunity to receive a fee as an added incentive to enhance the performance of the fund, the amount of the fee may be based on the extent to which the performance of the fund exceeds an agreed upon hurdle rate of return. Such a fee is referred to as a: A) Bonus B) Hurdle fee C) Fiduciary fee D) Promote

Q: Given the following fee structure, what is the total amount of fees that would be paid to a fund manager if the actual NOI was $45 million annually: 5.5% up to $20 million in annual NOI 5.0% for the next $35 million in annual NOI 4.5% for the next $45 million in annual NOI 4.0% for all over $45 million in annual NOI A) $2.3 million B) $1.1 million C) $2.0 million D) $1.8 million

Q: Which of the following is NOT a type of fee commonly charged by a real estate investment fund manager: A) acquisition fees B) disposition fees C) commitment fees D) performance fees

Q: During the period before a fund manager begins to physically purchase properties, investors are typically asked to make capital ________. A) calls B) commitments C) contributions D) assurances

Q: Fund managers generally include a ________ policy in the fund documents specifying conditions under which investors may exit the fund. A) recovery B) recuperative C) reclamation D) redemption

Q: Investors may be concerned if a fund manager deviates from the stated investment strategy by purchasing properties that do not fall within the parameters of the stated objectives of the firm. This practice is referred to as: A) Overage B) Plan deviation C) Style drift D) Eccentricity

Q: A core strategy typically uses the type of fund structure under which new investors may be admitted after the initial offering and after the commencement of fund operations. These funds are referred to as: A) closed-end funds B) finite funds C) liquidation funds D) open-end funds

Q: Which type of fund structure would investment managers be likely to use in order to raise a specific amount of capital over a specific period of time? A) open-end fund B) closed-end fund C) finite fund D) liquidation fund

Q: A ________ fund structure is commonly used by managers of very large, open-end funds that are expected to hold a substantial number of properties in various locations. A) commingled B) separate C) conjoined D) adjacent

Q: ________ funds take on risks by conducting ground up development projects that expose the funds to additional construction risks, such as entitlements, construction delays, cost overruns, complex JV management issues, and so on, and use a relatively high degree of financial leverage. A) Core B) Opportunity C) Value-add D) Core Plus

Q: Which of the following is NOT one of the typical categories of real estate investment funds? A) Core funds B) Value-added funds C) Growth funds D) Opportunity funds

Q: Which of the following documents is used to inform real estate fund investors of the discretion that managers may exercise related to the acquisition, management, and sale of properties in the fund? A) fund agreement B) prospectus C) due diligence record D) deed of trust

Q: Large, private funds are typically created by real estate investment managers who develop an investment strategy involving which of the following: (1) the types of properties to be acquired and markets where acquisitions will be made, (2) how the fund will be operated, (3) when properties are to be sold, and (4) how the fund strategy will align with the real estate investment requirements of investors. A) 1, 2, 3 B) 1, 2, 4 C) 2, 3, 4 D) All of the above

Q: Value-added funds take on less risk than core funds by purchasing only properties with very low vacancies and stable tenants.

Q: Investors may use attribution analysis to examine why the performance of an actively managed real estate investment fund has exceeded its benchmark return.

Q: Unrealized returns are important to investors in assessing the performance of their investments and of their fund manager(s).

Q: When reporting on a real estate investment fund, a manager may treat the financial information as an estimate of performance based on the assumption that all of the underlying properties could be sold at their appraised value.

Q: In reporting on a fund's investment performance, managers are generally permitted to provide investors with internally performed appraisals at specific time intervals. Third-party, external appraisals are required only when a property is sold.

Q: Compared to stock and bond funds, real estate investment funds are typically much easier to value due to the availability of real estate appraisals.

Q: The investment strategy of a fund may exclude certain markets, submarkets, and/or property categories from the fund manager's investment options.

Q: A new real estate investment fund might feature a "lock-up period" that would prohibit investors from exiting the fund during the fund's first year or two in operation.

Q: Opportunity funds are designed for long-term investment and, accordingly, will generally maintain ownership of acquired properties for several years.

Q: In a well-diversified investment portfolio, the allocation of real estate investments should not exceed five percent.

Q: Investments that are held "in trust" on behalf of a pension plan's beneficiaries cause the fiduciary duties and responsibilities of pension plan sponsors to "carry over" to managers of these real estate investment funds.

Q: Which of the following is a major property category associated with the NCREIF Index: A) Apartment complexes B) Office buildings C) Hotels D) All of the above

Q: One would see the greatest amount of diversification from two securities that are: A) Positively correlated B) Negatively correlated C) Not correlated D) Perfectly correlated

Q: The unit of measure that is used by portfolio managers to measure returns for individual securities on a periodic basis is the: A) Return on investment (ROI) B) Holding period return (HPR) C) Geometric mean return D) Arithmetic mean return

Q: The optimal combination of securities that provides the greatest amount of return for each level of risk is known as: A) The expected frontier B) The economic frontier C) The efficient frontier D) None of the above

Q: Assume a portfolio is comprised of two securities, A and B, whose standard deviations are 0.0412 and 0.0721, respectively. If their covariance is 0.002, what is their coefficient of correlation? A) 0.005 B) 0.115 C) 0.673 D) 1.485

Q: If the returns of two securities are compared over time and there appears to be no relationship between their movements, what is the likely value of their coefficient of correlation? A) +1 B) −1 C) 0 D) +∞ (infinity)

Q: Which of the following provides a measure of the extent to which returns tend to move together or have no relationships? A) The coefficient of determination B) The variance C) The coefficient of variation D) The coefficient of correlation

Q: The coefficient of variation, also known as the risk-to-reward ratio, is defined as: A) The standard deviation of returns divided by the mean return B) The variance of return multiplied by the mean return C) The variance of returns divided by the standard deviation of returns D) None of the above

Q: Regarding real estate investments, risk that is associated with the type of property and its location, design, lease structure, and so on can be thought of as: A) Marketability risk B) Liquidity risk C) Business risk D) Interest rate risk

Q: Geometric mean returns are: A) Simple averages of holding period returns B) Expressed as compound rates of interest C) More applicable when no specific time interval is considered to be any more important than another D) Widely used in statistical studies spanning very long periods of time