Commercial Real Estate Test Questions -
Solved
Joe is considering two different investment properties. Property A has a before-tax cash
flow of $6,000 with a total investment cost of $170,000. Property B has a before-tax
cash flow of $6,000 with a total investment cost of $65,000. Which property would give
the best return on his investment? - Answers -✔✔ Property B with a 9.23% return
What are some of the difficulties of owning a multi-family residence compared to a
single-family residence? - Answers -✔✔ more maintenance, managing utilities,
soundproofing issues
The property manager of an apartment complex has to call in a plumber to replace a
unit's broken toilet. For the owner, this is an example of what kind of operating
expense? - Answers -✔✔ variable expense
Before-tax cash flow ÷ Total investment cost = Cash-on-cash return. Property A is
$6,000 ÷ $170,000 = .0353 = 3.53%. Property B is $6,000 ÷ $65,000 = .0923 = 9.23%.
So, Property B would provide a better return, since a 9.23% return is better than a
3.53% return.
Which of these does a mixed-use building blend together? - Answers -✔✔ residential
and commercial
Which of these is most likely to have a percentage lease? - Answers -✔✔ the Lady
Footlocker in the new mall
What is capital market risk? - Answers -✔✔ a market change in the ability for individuals
to obtain a loan
What are the three main ways real estate investors make money with their properties? -
Answers -✔✔ income, appreciation, and investment gain
Which lease is most commonly used for retail properties? - Answers -✔✔ percentage
lease
Ingrid recently invested in a rental home for a second source of income. Her cash flow
from the investment property is lower than her mortgage payments. What is this an
example of? - Answers -✔✔ negative leverage
What is a property's T12? - Answers -✔✔ a property's financial statements for the
previous 12 consecutive months
Solved
Joe is considering two different investment properties. Property A has a before-tax cash
flow of $6,000 with a total investment cost of $170,000. Property B has a before-tax
cash flow of $6,000 with a total investment cost of $65,000. Which property would give
the best return on his investment? - Answers -✔✔ Property B with a 9.23% return
What are some of the difficulties of owning a multi-family residence compared to a
single-family residence? - Answers -✔✔ more maintenance, managing utilities,
soundproofing issues
The property manager of an apartment complex has to call in a plumber to replace a
unit's broken toilet. For the owner, this is an example of what kind of operating
expense? - Answers -✔✔ variable expense
Before-tax cash flow ÷ Total investment cost = Cash-on-cash return. Property A is
$6,000 ÷ $170,000 = .0353 = 3.53%. Property B is $6,000 ÷ $65,000 = .0923 = 9.23%.
So, Property B would provide a better return, since a 9.23% return is better than a
3.53% return.
Which of these does a mixed-use building blend together? - Answers -✔✔ residential
and commercial
Which of these is most likely to have a percentage lease? - Answers -✔✔ the Lady
Footlocker in the new mall
What is capital market risk? - Answers -✔✔ a market change in the ability for individuals
to obtain a loan
What are the three main ways real estate investors make money with their properties? -
Answers -✔✔ income, appreciation, and investment gain
Which lease is most commonly used for retail properties? - Answers -✔✔ percentage
lease
Ingrid recently invested in a rental home for a second source of income. Her cash flow
from the investment property is lower than her mortgage payments. What is this an
example of? - Answers -✔✔ negative leverage
What is a property's T12? - Answers -✔✔ a property's financial statements for the
previous 12 consecutive months
