REE 3043 FINAL EXAM REVIEW QUESTIONS 2026
Due-on-sales clauses are included in commercial mortgages primarily to protect lenders
from: - Answers - Default Risk
Consider a 30-year, 7%, fixed rate, fully amortizing mortgage with a yield maintence
provision. Relative to this mortgage, a 10-year balloon mortgage with the same interest
rate and yield maintenance provisions will primarily reduce the lender's: - Answers -
Interest rate risk
Lockout provisions are primarily intended to reduce the lender's: - Answers -
Reinvestment risk
The tax-benefits associated with installment sales are: - Answers - Captured exclusively
by the seller
Which of the following statements is most accurate? - Answers - Joint ventures usually
decrease the amount of equity capital the developer/borrower must invest in the project
Which of the following financing structures provides for 100% financing? - Answers -
Complete (land and building) sale-leaseback
Using financial leverage on a real estate investment can be for the purpose of all of the
following except: - Answers - Reduction of financial risk for the leveraged investment
Which of these ratios is an indicator of the financial risk for an income property? -
Answers - Both a and b, but not c
If the property's NOI is expected to be $22,560 operating expenses $12,250, and the
debt service $19,987, the debt coverage ratio (DCR) is approximately equal to: -
Answers - 1.13
With a mezzanine loan: - Answers - the borrower's promise to pay is secured by the
equity interest in the borrower's limited partnership or limited liability company.
Double taxation is most likely to occur if the commercial properties are held in the form
of a: - Answers - C Corporation
With regard to double taxation, distributions, and the treatment of the losses, general
partnerships are most like: - Answers - Limited partnerships
Special allocations of income or loss are avaliable if the form of ownership is a: -
Answers - Limited partnership
, Real estate syndicates traditionally have been legally organized most frequently as: -
Answers - Limited partnerships
A real estate investment trust generally: - Answers - none of the above
Which of the following forms of ownership involve both limited and unlimited liability: -
Answers - Limited partnerships
Which statement is false concerning the limited partnership of ownership? - Answers -
The limited partners cannot enjoy tax deduction benefits but the general partners can
Which of these lenders is most likely to provide a construction loan? - Answers -
Commercial bank
Which of these loans is a life insurance company most likely to invest in? - Answers -
Large office building loan (non construction)
Which of these financial firms is the least likely to invest in a large, long-term mortgage
loan on a shopping center? - Answers - Mortgage broker
Income multipliers: - Answers - are useful as preliminary analysis tool to weed out
obviously unacceptable investment opportunities
The overall capitalization rate calulated on a potential acquisition: - Answers - is the
reciprocal of the net income multiplier
The operating expense ratio: - Answers - expresses operating expenses as a percent of
effective gross income
The equity dividend rate: - Answers - expresses before-tax cash flow as a percent of the
required equity captial investment
Ratio analysis: - Answers - serves as an initial evaluation of the adequacy of an
investment's expected cash flows
Which of the following is not an operating expense associated with income-producing
commercial property? - Answers - debt service
A real estate investment is avaliable at an initial cash outlay of $10,000, and is expected
to yield cash flows of $3,343.81 per year for five years. The internal rate of return (IRR)
is approximately: - Answers - 20 percent
The net present value of an acquisition is equal to: - Answers - the present value of
expected future cash flows, less the initial cash outlay
Due-on-sales clauses are included in commercial mortgages primarily to protect lenders
from: - Answers - Default Risk
Consider a 30-year, 7%, fixed rate, fully amortizing mortgage with a yield maintence
provision. Relative to this mortgage, a 10-year balloon mortgage with the same interest
rate and yield maintenance provisions will primarily reduce the lender's: - Answers -
Interest rate risk
Lockout provisions are primarily intended to reduce the lender's: - Answers -
Reinvestment risk
The tax-benefits associated with installment sales are: - Answers - Captured exclusively
by the seller
Which of the following statements is most accurate? - Answers - Joint ventures usually
decrease the amount of equity capital the developer/borrower must invest in the project
Which of the following financing structures provides for 100% financing? - Answers -
Complete (land and building) sale-leaseback
Using financial leverage on a real estate investment can be for the purpose of all of the
following except: - Answers - Reduction of financial risk for the leveraged investment
Which of these ratios is an indicator of the financial risk for an income property? -
Answers - Both a and b, but not c
If the property's NOI is expected to be $22,560 operating expenses $12,250, and the
debt service $19,987, the debt coverage ratio (DCR) is approximately equal to: -
Answers - 1.13
With a mezzanine loan: - Answers - the borrower's promise to pay is secured by the
equity interest in the borrower's limited partnership or limited liability company.
Double taxation is most likely to occur if the commercial properties are held in the form
of a: - Answers - C Corporation
With regard to double taxation, distributions, and the treatment of the losses, general
partnerships are most like: - Answers - Limited partnerships
Special allocations of income or loss are avaliable if the form of ownership is a: -
Answers - Limited partnership
, Real estate syndicates traditionally have been legally organized most frequently as: -
Answers - Limited partnerships
A real estate investment trust generally: - Answers - none of the above
Which of the following forms of ownership involve both limited and unlimited liability: -
Answers - Limited partnerships
Which statement is false concerning the limited partnership of ownership? - Answers -
The limited partners cannot enjoy tax deduction benefits but the general partners can
Which of these lenders is most likely to provide a construction loan? - Answers -
Commercial bank
Which of these loans is a life insurance company most likely to invest in? - Answers -
Large office building loan (non construction)
Which of these financial firms is the least likely to invest in a large, long-term mortgage
loan on a shopping center? - Answers - Mortgage broker
Income multipliers: - Answers - are useful as preliminary analysis tool to weed out
obviously unacceptable investment opportunities
The overall capitalization rate calulated on a potential acquisition: - Answers - is the
reciprocal of the net income multiplier
The operating expense ratio: - Answers - expresses operating expenses as a percent of
effective gross income
The equity dividend rate: - Answers - expresses before-tax cash flow as a percent of the
required equity captial investment
Ratio analysis: - Answers - serves as an initial evaluation of the adequacy of an
investment's expected cash flows
Which of the following is not an operating expense associated with income-producing
commercial property? - Answers - debt service
A real estate investment is avaliable at an initial cash outlay of $10,000, and is expected
to yield cash flows of $3,343.81 per year for five years. The internal rate of return (IRR)
is approximately: - Answers - 20 percent
The net present value of an acquisition is equal to: - Answers - the present value of
expected future cash flows, less the initial cash outlay
