REE3043 TEST QUESTIONS WITH
CERTIFIED ANSWERS –
UPDATED!!
Answer-False - these periods come from long length of construction period and
mortgage lenders' lending policies
T or F: Rents reflect the price of space and sale prices reflect the value of assets and
the right to collect rents - Answer-True
T or F: 3 key trends that will affect commercial real estate markets are population
growth, technology trends, and the changes anticipated in the ethnic composition of the
population - Answer-True
T or F: A primary factor affecting the demand for office space is the number of
developers in a market - Answer-False - number of developers is a factor of supply, not
demand
T or F: If the actual vacancy rate is 15% and the natural vacancy rate is 12%, the
market is said to be somewhat under-built - Answer-False - supply exceeds demand
Efficient markets - Answer-a market in which all available information is incorporated
into prices so quickly that money cannot be made by having that information
Residential property represents what percent of real estate wealth in the US? - Answer-
75%
Who owns the majority of US property? - Answer-Homeowners and mortgage lenders
Owner-occupied homes represent about what percent of real estate in the US? -
Answer-60%
What percent of owner occupied homes is owned by owners' equity and mortgage debt,
respectively? - Answer-55% and 45%
Commercial real estate represents about what percent of all real estate in US? What
percent is owners equity and mortgage lenders? - Answer-40%. 75% owners, 25%
lenders.
How much of outstanding residential mortgages are unsecuritized? - Answer-half
Property value is affected by an investor's estimate of: - Answer-1. magnitude of
expected cash flows
2. timing of expected cash flows
3. riskiness of expected cash flows
, Risk averse - Answer-requires greater returns for willingness to bear more risk
Risk Neutral - Answer-require no additional compensation for more risk
Risk Seeking - Answer-require less return as risk increases
Weight-gaining product - Answer-When a product is manufactured it increases in size
ex: Coke ships as syrup, water is added at bottling plant
Weight-losing product - Answer-As a product is manufactured, it's parts combine to
make a smaller product than the total amount of its parts. Ex: steel, comes from large
amounts of coal and iron, makes a little steel
The value of income producing property depends on its - Answer-Expected cash flows,
the timing of those cash flows, and the riskiness of those cash flows
Real estate investors earn returns on their investments from - Answer-Rental income
and property appreciatiob
Investment risk - Answer-The probability that actual cash flows will differ from what was
expected
Most real estate investors are - Answer-Risk averse
The outstanding balance on a mortgage loan can be calculated as - Answer-The
present value of the remaining payments discounted at the contract interest rate
Investors purchase income-producing property to obtain the proceeds from - Answer-
periodic income payments (rent) and appreciation of the asset (selling price)
Capitalization Rate - Answer-R = net operating income / acquisition price
Contract Rent - Answer-The rent specified in the lease contract
Market Rent - Answer-The rent that could be obtained by renting the property on the
open marktet
Income properties are purchased by investors who desire primarily to receive - Answer-
periodic income and appreciation
Net Operating Income - Answer-Potential Gross Income - Vacancy and Collection
losses + other misc income - operating expenses
T or F: An investment philosophy outlines mainly whether the real estate investor will be
an active or passive investor - Answer-True
T or F: The rental rate specified in the lease contract is termed market rent - Answer-
False - it's contract rent
CERTIFIED ANSWERS –
UPDATED!!
Answer-False - these periods come from long length of construction period and
mortgage lenders' lending policies
T or F: Rents reflect the price of space and sale prices reflect the value of assets and
the right to collect rents - Answer-True
T or F: 3 key trends that will affect commercial real estate markets are population
growth, technology trends, and the changes anticipated in the ethnic composition of the
population - Answer-True
T or F: A primary factor affecting the demand for office space is the number of
developers in a market - Answer-False - number of developers is a factor of supply, not
demand
T or F: If the actual vacancy rate is 15% and the natural vacancy rate is 12%, the
market is said to be somewhat under-built - Answer-False - supply exceeds demand
Efficient markets - Answer-a market in which all available information is incorporated
into prices so quickly that money cannot be made by having that information
Residential property represents what percent of real estate wealth in the US? - Answer-
75%
Who owns the majority of US property? - Answer-Homeowners and mortgage lenders
Owner-occupied homes represent about what percent of real estate in the US? -
Answer-60%
What percent of owner occupied homes is owned by owners' equity and mortgage debt,
respectively? - Answer-55% and 45%
Commercial real estate represents about what percent of all real estate in US? What
percent is owners equity and mortgage lenders? - Answer-40%. 75% owners, 25%
lenders.
How much of outstanding residential mortgages are unsecuritized? - Answer-half
Property value is affected by an investor's estimate of: - Answer-1. magnitude of
expected cash flows
2. timing of expected cash flows
3. riskiness of expected cash flows
, Risk averse - Answer-requires greater returns for willingness to bear more risk
Risk Neutral - Answer-require no additional compensation for more risk
Risk Seeking - Answer-require less return as risk increases
Weight-gaining product - Answer-When a product is manufactured it increases in size
ex: Coke ships as syrup, water is added at bottling plant
Weight-losing product - Answer-As a product is manufactured, it's parts combine to
make a smaller product than the total amount of its parts. Ex: steel, comes from large
amounts of coal and iron, makes a little steel
The value of income producing property depends on its - Answer-Expected cash flows,
the timing of those cash flows, and the riskiness of those cash flows
Real estate investors earn returns on their investments from - Answer-Rental income
and property appreciatiob
Investment risk - Answer-The probability that actual cash flows will differ from what was
expected
Most real estate investors are - Answer-Risk averse
The outstanding balance on a mortgage loan can be calculated as - Answer-The
present value of the remaining payments discounted at the contract interest rate
Investors purchase income-producing property to obtain the proceeds from - Answer-
periodic income payments (rent) and appreciation of the asset (selling price)
Capitalization Rate - Answer-R = net operating income / acquisition price
Contract Rent - Answer-The rent specified in the lease contract
Market Rent - Answer-The rent that could be obtained by renting the property on the
open marktet
Income properties are purchased by investors who desire primarily to receive - Answer-
periodic income and appreciation
Net Operating Income - Answer-Potential Gross Income - Vacancy and Collection
losses + other misc income - operating expenses
T or F: An investment philosophy outlines mainly whether the real estate investor will be
an active or passive investor - Answer-True
T or F: The rental rate specified in the lease contract is termed market rent - Answer-
False - it's contract rent
