REAL 4000 Test 3 Exam Questions and
Answers
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?
They are difficult to calculate.
They fail to incorporate cash flows beyond the first year of the analysis.
They are rarely used by industry professionals.
They are complex to understand. - -They fail to incorporate cash flows
beyond the first year of the analysis.
- BTCF is an unlevered cash flow, while NOI is a levered cash flow.
True
False - -False
- Given the following information, calculate the cash down payment (equity)
required to purchase the specific property:
purchase price: $500,000;
loan amount: 75% of purchase price;
up-front financing costs: 2.5% of loan amount. - -134,375.00
- Given the following information, calculate the debt coverage ratio for this
investment:
potential gross income: $120,000;
vacancy rate: 9%;
net operating income: $60,000;
operating expenses: $51,300;
acquisition Price: $520,000;
debt service: $40,000.
4.23
1.50
1.45
0.67
8.29 - -1.50
- Given the following information, calculate the going-in capitalization rate
for the specific property:
first-year NOI: $19,000;
acquisition price: $155,000;
equity investment: 20%
12.50%
62.57%
15.66%
, 12.26% - -12.26%
- Assume the following for a floor in a multistory office building with a total
usable area of 20,000 sq ft; a total common area of 5,000 sq ft; a total
rentable area of 25,000 sq ft; and a tenant called "Highwoods Inc." that has a
usable area: 4,000 sq ft and an annual flat rental rate of $25 per sq ft.
How much total rent does Highwoods Inc pay per year at this property?
1,200,000
$220,000
$200,000
$250,000
$125,000
$120,000
$100,000 - -$125,000
- *Note, these are the same assumptions as the previous question*
Assume the following for a floor in a multistory office building with a total
usable area of 20,000 sq ft; a total common area of 5,000 sq ft; a total
rentable area of 25,000 sq ft; and a tenant called "Highwoods Inc." that has a
usable area: 4,000 sq ft and an annual flat rental rate of $25 per sq ft.
What is the load factor for this property?
1.15
1.20
1.25
1.30
1.35
1.75
1.80 - -1.25
- NOI is considered the fundamental determinant of market value for
income-producing properties
True
False - -True
- The starting point in calculating net operating income is the total annual
income the property would produce assuming 100% occupancy and no
collection losses is called Effective Gross Income (EGI)
True
False - -False
- One complication that appraisers may face is the variety of lease types
that may be available for a particular property type. Which of the following
statements best describes a graduated or step-up lease?
Rental rate increases are indexed to the general rate of inflation
The lease establishes a schedule of rental rate increases over the term of the
lease.
Answers
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?
They are difficult to calculate.
They fail to incorporate cash flows beyond the first year of the analysis.
They are rarely used by industry professionals.
They are complex to understand. - -They fail to incorporate cash flows
beyond the first year of the analysis.
- BTCF is an unlevered cash flow, while NOI is a levered cash flow.
True
False - -False
- Given the following information, calculate the cash down payment (equity)
required to purchase the specific property:
purchase price: $500,000;
loan amount: 75% of purchase price;
up-front financing costs: 2.5% of loan amount. - -134,375.00
- Given the following information, calculate the debt coverage ratio for this
investment:
potential gross income: $120,000;
vacancy rate: 9%;
net operating income: $60,000;
operating expenses: $51,300;
acquisition Price: $520,000;
debt service: $40,000.
4.23
1.50
1.45
0.67
8.29 - -1.50
- Given the following information, calculate the going-in capitalization rate
for the specific property:
first-year NOI: $19,000;
acquisition price: $155,000;
equity investment: 20%
12.50%
62.57%
15.66%
, 12.26% - -12.26%
- Assume the following for a floor in a multistory office building with a total
usable area of 20,000 sq ft; a total common area of 5,000 sq ft; a total
rentable area of 25,000 sq ft; and a tenant called "Highwoods Inc." that has a
usable area: 4,000 sq ft and an annual flat rental rate of $25 per sq ft.
How much total rent does Highwoods Inc pay per year at this property?
1,200,000
$220,000
$200,000
$250,000
$125,000
$120,000
$100,000 - -$125,000
- *Note, these are the same assumptions as the previous question*
Assume the following for a floor in a multistory office building with a total
usable area of 20,000 sq ft; a total common area of 5,000 sq ft; a total
rentable area of 25,000 sq ft; and a tenant called "Highwoods Inc." that has a
usable area: 4,000 sq ft and an annual flat rental rate of $25 per sq ft.
What is the load factor for this property?
1.15
1.20
1.25
1.30
1.35
1.75
1.80 - -1.25
- NOI is considered the fundamental determinant of market value for
income-producing properties
True
False - -True
- The starting point in calculating net operating income is the total annual
income the property would produce assuming 100% occupancy and no
collection losses is called Effective Gross Income (EGI)
True
False - -False
- One complication that appraisers may face is the variety of lease types
that may be available for a particular property type. Which of the following
statements best describes a graduated or step-up lease?
Rental rate increases are indexed to the general rate of inflation
The lease establishes a schedule of rental rate increases over the term of the
lease.
