Commercial Real Estate Exam (Actual) Questions and Answers A+ Pass

Commercial Real Estate Exam (Actual) Questions and Answers A+ Pass What do you call your personal cash that you invest into a property? - Answers - Equity Should NOI be more or less than your interest rate? - Answers - More Is debt bad? - Answers - It depends What are the components of debt? - Answers - Principal and interest Calculate the loan principal using the following information: Annual interest:8% Interest expense: 14,000 - Answers - 175,000 x .08= 14,000 Calculate the interest rate using the following information Interest expense 18,000 Loan principal 150,000 - Answers - 150,000 x .12= 18000 Using the following information calculate the annual interest payment Loan principal 150000 Annual interest 6% - Answers - 150000 x .06= 9,000 What do you call the money from investors who will co-won the building with you? - Answers - Equity What do you call the original sum of money borrowed from a lender? - Answers - Principal What do you call the money that you borrow from a lender or a bank that you pay back over time plus interest? - Answers - Debt Assuming each building is in the same neighborhood, which of these properties do you think has a higher cap rate? - Answers - Older building Let's assume we have two of the same buildings. One building is in a popular city and the other is in an unpopular city. Which of these properties might have a higher cap rate? - Answers - Unpopular city Let's assume we have the two of the same buildings. One building is in a neighborhood with lots of crime and the other is in a neighborhood with low crime, which of these properties might have a higher cap rate? - Answers - High crime If a building has a value of 600,000 and a cap rate of 4% what is the buildings NOI? - Answers - 600,000 x .04= 24,000 The total possible rent is 15,000 and the building is 80% occupied. What is the net rent? - Answers - 15,000 x .8= 12,000 Calculate the properties total expenses using the following information Property taxes 1,100 Maintenance 1,050 Utilities 2,100 Insurance 775 Management fees 2,500 - Answers - Add them all together to get 7525 Calculate net operating income (NOI) based on the following information Total revenue 216,000 Total expenses 72000 - Answers - = 144,000 The newspaper just announced that the neighborhood was recently ranked the best neighborhood in the country for restaurants. Would you expect the cap rate to go up or down? - Answers - Down If the building generates 28,000 of NOI and has a value of 350,000, what is the cap rate of this building? - Answers - 28,000/ .08= 350000 If a building generates 72000 of NOI and has a cap rate of 8% what is the value of this building? - Answers - 72000/ .08= 900000 Decide if you would invest based on the 10-6 model given the following information Total revenue 200000 Total expenses 120000 - Answers - Would invest Emely plans to purchase land to build a 10-unit apartment building. How would you categorize her potential investment? - Answers - Opportunistic