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 produces a first-year net operating income of $24,000. Because of the long economic life of the building, the income is considered as a perpetuity that will grow by 2.5% per year. Using a discount rate of 9.5%, the property value is estimated at:
A) $276,968
B) $252,632
C) $200,000
D) $342,857
Q:
Which of the following expenses would NOT be included in an operating statement used to calculate net operating income in the income approach to value?
A) Reserves for replacement
B) Maintenance
C) Real estate taxes
D) Capital additions
Q:
Given the following sales adjustment grid, what adjustment would be made for size? Characteristic
Subject
1
2
3
4 Sales price 116,000 120,000 124,000 126,000 Square feet
1,800 1,700 1,900 1,900 1,900 Exterior
Alum Brick Alum Alum Brick Age
16 20 20 18 20 A) $23.65 psf.
B) $45.82 psf.
C) $65.74 psf.
D) $38.26 psf.
Q:
A comparable property has a feature that is superior to the subject property. What adjustment would be made in the sales comparison approach to value?
A) Value of the feature would be subtracted from the sales price of the comparable property
B) Value of the feature would be added to the sales price of the comparable property
C) Value of the feature would be subtracted from the value of the subject property
D) Value of the feature would be added to the value of the subject property
Q:
Which of the following choices represents the main categories of depreciation?
A) Physical, external, functional
B) Physical, economic, locational
C) External, structural, financial
D) Economic, physical, external
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:
Regarding the value of a property, an appraisal:
A) Calculates value
B) Confirms value
C) Estimates value
D) 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:
Consider the table for an income property that is under evaluation for purchase with a $455,000 loan. What would be the equity dividend rate? Year 1 Year 2 Year 3 NOI
$
72,000 $
74,880 $
77,875 DS 60,000 60,000 60,000 Cash flow
$
12,000 $
14,880 $
17,875 Resale in year 3 900,000 Less mortgage balance −435,000 Total cash flow
$
12,000 $
14,880 $
482,875 Present value of cash flow @ 15%
$
10,435 $
11,251 $
317,498 A) 2.4 percent
B) 3.5 percent
C) $12,000
D) $317,498
Q:
Consider the table for an income property that is under evaluation for purchase with a $455,000 loan. Using the principles of mortgage equity capitalization, what is the estimated total property value (rounded to the nearest $100)? Year 1 Year 2 Year 3 NOI
$
72,000 $
74,880 $
77,875 DS 60,000 60,000 60,000 Cash flow
$
12,000 $
14,880 $
17,875 Resale in year 3 900,000 Less mortgage balance −435,000 Total cash flow
$
12,000 $
14,880 $
482,875 Present value of cash flow @ 15%
$
10,435 $
11,251 $
317,498 A) $317,500
B) $482,900
C) $772,500
D) $794,200
Q:
Consider a property with NOI of $72,000 and a debt coverage ratio of 1.2 applied to first year NOI. What would be the estimated monthly mortgage payment?
A) $5,000
B) $7,200
C) $60,000
D) $86,400
Q:
Consider a building with a very long economic life. Assume at the end of year 6, NOI will be $80,000 and is expected to grow at a rate of 2 percent per year. Your company's required rate of return is 12 percent. As part of your analysis, you must calculate the reversion value (REV) at the end of year 5, which would be:
A) $571,429
B) $666,667
C) $800,000
D) $4,000,000
Q:
Which of the following techniques is NOT associated with the income approach to valuation?
A) Capitalization rate
B) Discounted present value
C) Factor discounting rates
D) Gross income multiplier
Q:
Which of the following statements regarding the sales comparison approach to appraisal is TRUE?
A) As a "rule of thumb" transactions involving foreclosures should be discounted by 10 percent
B) The comparable buildings' characteristics are more important than the comparable properties' location for performing the sales comparison
C) The comparable sales must involve transactions between unrelated individuals
D) The only factors important for comparable analysis are property size, building size, age of the building, and the condition of building
Q:
Consider the table. Assume that the subject property has effective gross income of $53,000 and a NOI of $27,500. What value would a cap rate approach yield (rounded to the nearest $100)? A) $322,600
B) $325,600
C) $328,600
D) $330,000
Q:
Consider the table. Assume that the subject property has effective gross income of $53,000 and a NOI of $27,500. What value would a GIM approach yield (rounded to the nearest $100)? A) $322,600
B) $325,600
C) $328,600
D) $330,000
Q:
The discount rate establishes the minimum return that an investor is willing to accept when evaluating the potential purchase of an income-producing property.
Q:
The assumption that a knowledgeable buyer would not pay more for property than what other buyers have recently paid for comparable properties, provides the rationale for the sales comparison approach.
Q:
The capitalization rate of a newly constructed apartment building will be more than that of a relatively old apartment building, which is comparable in all other aspects.
Q:
Return on investment and change in net operating income are essential factors for cost analysis.
Q:
Appraisers use bracketing in order to estimate the upper and lower range of value.
Q:
The market method or direct sales comparison method of estimating site value is not the most reliable method available.
Q:
The equity value can be estimated by subtracting debt service from net operating income and dividing this amount by the equity dividend rate.
Q:
The capitalization rate for a leased fee estate should always be lower than the capitalization rate for a fee simple estate.
Q:
A property is purchased for $350,000. Based on an annual growth rate of 3%, the resale value at the end of year 10 would be $456,671.
Q:
The capitalization rate is equal to the discount rate minus any expected annual growth in income and property value.
Q:
An overall capitalization rate can be calculated by dividing the net operating income by the property value.
Q:
A gross income multiplier can be calculated by dividing the gross income by the sales price.
Q:
A building has 12 foot ceilings that cause the electric bill to be $1,200 higher per year than a conventional ceiling height. Depreciation caused by the ceilings can be estimated by calculating the present value of the $1,200 per year over the remaining economic life of building.
Q:
In the income approach to valuation, replacement cost is reduced by costs such as those that are associated with curing deterioration of the property and the economic loss of value from incurable factors due to change in design or layout efficiency.
Q:
In the cost approach to valuation, land value can be estimated by comparing sales of vacant land that are similar to the subject land.
Q:
When conducting an appraisal, only one of three approaches should be selected to determine the property value.
Q:
The rationale for using the cost approach to appraisal is that any informed buyer would not pay more for a property than what it would cost to buy the land and build the structure.
Q:
One advantage of the gross income multiplier technique is that it is most suitable for properties in which operating expenses vary widely across the properties being surveyed.
Q:
When using the gross income multiplier technique in conjunction with the income approach to valuation, potential gross income is preferred to effective gross income.
Q:
The sales comparison approach to appraisal is preferred because it is the only objective appraisal approach.
Q:
A manufacturing business is contracting to lease a large, open building and is seeking to add partition walls and a large air conditioning unit in order to accommodate its specific needs. What type of lease is the building owner likely to want to agree to?
A) Gross lease
B) Modified lease with direct pass throughs
C) Single net lease
D) Triple net lease
Q:
Which of the following would be considered as expense pass throughs in a lease?
A) Electricity
B) Landscaping fees
C) Security costs
D) Property taxes
Q:
The price a potential tenant must pay to lease a specific type of real estate under the current economic conditions is:
A) Percentage rent
B) Market rent
C) Effective rent
D) Base rent
Q:
Which of the following leads to rent premiums?
A) Apartments on the periphery of a site; higher floors with no elevators
B) Second or third levels in multi-level malls
C) Middle floors in an 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 tend to lower cap rates
C) Excess demand and falling interest rates result 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 loss of rents due to vacancy and nonpayment of rents, as well as any concessions, 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 considered to be an office or retail property?
A) Single-tenant - build to suit
B) Regional shopping center
C) Warehouse
D) Community center
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 10 percent discount rate, what is the effective rent over the three years?
A) $17.28
B) $18.94
C) $20.94
D) $42.98
Q:
A building owner charges net rent of $20 in the first year, $21 in the second year, and $22 in the third year. Using a 10 percent discount rate, what is the effective rent over the three years?
A) $20.00
B) $20.94
C) $21.73
D) $52.07
Q:
For which of the following reasons would a business prefer to own space rather than lease it?
A) The business demands specialized or unique facilities
B) Owning allows the business to develop skills in operating, maintaining, and repairing real estate and the associated facilities
C) Owning reduces operating flexibility
D) The capital commitments with owning are lower than the capital commitments associated with leasing
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
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
Q:
Consider the figure above. Point D represents:
A) Equilibrium occupancy
B) Market rent
C) Vacancy
D) Shortage
Q:
The great majority of businesses lease the space they occupy rather than purchasing it outright.
Q:
Condominium complexes are considered to be nonresidential properties.
Q:
CPI adjustments are used to adjust rents by all or part of the increase in the Consumer Price Index.
Q:
Free rent is a concession that a building owner may offer.
Q:
In projecting cash flows for an office property, net operating income is the income after deduction of mortgage payments.
Q:
A gross lease is riskier for the lessor than a net lease.
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 "leasable area," in a building with multiple tenants.
Q:
A gross lease is one in which the tenant only pays rent, and the owner of the property pays the operating expenses and provides all services.
Q:
The term "percentage rent" refers to rent paid as a percent of space leased.
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:
Proration involves a professional who rates the quality of the property.
Q:
Financing costs are usually paid by the lender to either the borrower/buyer or the seller.
Q:
A residential real estate closing involves two actual closings: the loan closing and the sales transaction closing.
Q:
The APR for an adjustable rate mortgage loan is an accurate measure of the actual cost of funds to the borrower.
Q:
Determining the APR for federal truth-in-lending purposes is more complicated for an adjustable rate mortgage loan than it is for a fixed rate mortgage loan.