RE 3381 Midterm 1 Exam Questions and Answers Fully Solved Latest Version 2025-2026
The term real estate can be thought of in 4 different ways. What are they? - AnswersTangible asset
(physical), Intangible asset, Investment asset class, An industry
The four-quadrant model of the benefits of investing in real estate - AnswersCash Flow, Appreciation,
Diversification, Tax Benefits
Why invest in real estate formula - AnswersCash flow today + Cash flow in the future + appreciation
Why does real estate have value? - Answersutility, scarcity, anticipation
Define real estate user/space/property markets. - Answers"The Physical World"
-Locationally unique
-where we are using the real estate
-rents for physically similar spaces can vary widely across location and property types
Define real estate capital/asset markets. - Answers"The Financial World"
-Re competes for funds in the capital market with other asset classes such as stocks and bonds
-Investors select a mix of investments based on expected risks and returns
What is the #1 key driver of real estate demand? - AnswersLocation, locational economics and locational
demographics
What is real estate considered an inefficient asset class? - Answers- It trades in private, largely
unregulated markets
-Capital intensive (largely indivisible and leveraged transactions)
- Supply is durable and "lumpy"
-Ability for parties to have asymmetric information
- Location, location, location
Understand the interaction of the real estate space and asset markets. - AnswersSpace markets vs Asset
markets lead to value (look at picture)
When we say that real estate property rights are 3 dimensional, what do we mean? - AnswersReal
property: Rights in land and its permanent structures
3 Dimensions
,1. Surface of the earth and improvements
2. Air, up to reserved air space or tallest structure
3. Beneath the earth as far as technology allows: minerals, oil and gas, water
Personal property: All other property
- Personal and household goods
- Business property
Air Rights - AnswersBased in common law, but relevance changed with the advent of theskyscraper and
airplane
• Heights typically governed by building code and FAA flight paths
If allowed by the jurisdiction, there can be tremendous value in theirexchange.
Subsurface Mineral Rights - Answers• Subsurface rights carry implied interest for removal
• Mineral estates are considered to be dominant to the surface
• Subject to remediation and damages to the surfaceowner
Mineral rights can be divided/split
• Grantor can divide mineral estates
• Smaller interests
• Leasehold interests
• Royalty interests
Dominant legal foundation Rule of Capture
• Byproduct of the advent of the oil and gas industry
• Subject to pooling/unitization laws in some states
For property rights to have value, you have to assume that there is ___for them. - AnswersDEMAND
, What are the four key rights in the "bundle" of real property interests? - AnswersDisposition
Use
Possession
Exclusion
What is the most common form of a possessory interest in real estate? - AnswersEstates
possesory estate - AnswersEstates are split into Leasehold estates and Ownership (Freehold) estates and
the Freehold Estates go one step farther to Fee Simple (With Inheritance)
Fee Simple Estates are _____ - AnswersDivisible
-Can divide up the rights (air, property, subsurface, etc) in fee simple or leasehold estates
What are the 4 most common forms of non-possessory interests in real estate? - AnswersEasements
Licenses
Restrictive Covenants
Liens
Non-possessory interests - AnswersThey encumber property
-Right to use or restrict the use of another person's land/real property
- Key is that the holder of non-possessory interest does not OWN the property
Easements - Answers2 General Types: Appurtenant and In Gross
Appurtenant
Non-possessory relationship between two adjacent parcels of land
• Dominant parcel - "enjoys" the rights
• Servient parcel - encumbered by the rights
EX: Driveway easement, Scenic Easements
In Gross
The term real estate can be thought of in 4 different ways. What are they? - AnswersTangible asset
(physical), Intangible asset, Investment asset class, An industry
The four-quadrant model of the benefits of investing in real estate - AnswersCash Flow, Appreciation,
Diversification, Tax Benefits
Why invest in real estate formula - AnswersCash flow today + Cash flow in the future + appreciation
Why does real estate have value? - Answersutility, scarcity, anticipation
Define real estate user/space/property markets. - Answers"The Physical World"
-Locationally unique
-where we are using the real estate
-rents for physically similar spaces can vary widely across location and property types
Define real estate capital/asset markets. - Answers"The Financial World"
-Re competes for funds in the capital market with other asset classes such as stocks and bonds
-Investors select a mix of investments based on expected risks and returns
What is the #1 key driver of real estate demand? - AnswersLocation, locational economics and locational
demographics
What is real estate considered an inefficient asset class? - Answers- It trades in private, largely
unregulated markets
-Capital intensive (largely indivisible and leveraged transactions)
- Supply is durable and "lumpy"
-Ability for parties to have asymmetric information
- Location, location, location
Understand the interaction of the real estate space and asset markets. - AnswersSpace markets vs Asset
markets lead to value (look at picture)
When we say that real estate property rights are 3 dimensional, what do we mean? - AnswersReal
property: Rights in land and its permanent structures
3 Dimensions
,1. Surface of the earth and improvements
2. Air, up to reserved air space or tallest structure
3. Beneath the earth as far as technology allows: minerals, oil and gas, water
Personal property: All other property
- Personal and household goods
- Business property
Air Rights - AnswersBased in common law, but relevance changed with the advent of theskyscraper and
airplane
• Heights typically governed by building code and FAA flight paths
If allowed by the jurisdiction, there can be tremendous value in theirexchange.
Subsurface Mineral Rights - Answers• Subsurface rights carry implied interest for removal
• Mineral estates are considered to be dominant to the surface
• Subject to remediation and damages to the surfaceowner
Mineral rights can be divided/split
• Grantor can divide mineral estates
• Smaller interests
• Leasehold interests
• Royalty interests
Dominant legal foundation Rule of Capture
• Byproduct of the advent of the oil and gas industry
• Subject to pooling/unitization laws in some states
For property rights to have value, you have to assume that there is ___for them. - AnswersDEMAND
, What are the four key rights in the "bundle" of real property interests? - AnswersDisposition
Use
Possession
Exclusion
What is the most common form of a possessory interest in real estate? - AnswersEstates
possesory estate - AnswersEstates are split into Leasehold estates and Ownership (Freehold) estates and
the Freehold Estates go one step farther to Fee Simple (With Inheritance)
Fee Simple Estates are _____ - AnswersDivisible
-Can divide up the rights (air, property, subsurface, etc) in fee simple or leasehold estates
What are the 4 most common forms of non-possessory interests in real estate? - AnswersEasements
Licenses
Restrictive Covenants
Liens
Non-possessory interests - AnswersThey encumber property
-Right to use or restrict the use of another person's land/real property
- Key is that the holder of non-possessory interest does not OWN the property
Easements - Answers2 General Types: Appurtenant and In Gross
Appurtenant
Non-possessory relationship between two adjacent parcels of land
• Dominant parcel - "enjoys" the rights
• Servient parcel - encumbered by the rights
EX: Driveway easement, Scenic Easements
In Gross
