Real Estate Investments Exam 3
Questions with Complete Answers
mortgage-equity capitalization - ANSWER-value of property is estimated by explicitly
taking into consideration the requirements of the mortgage lender and the equity
investor
reconciliation: sales comparison and income capitalization approaches - ANSWER--
sales comparison method: cap rates reflect what investors are CURRENTLY
PAYING for comparable properties
-some properties that have recently sold are not truly comparable to properties
available for purchase
cost approach - ANSWER--rationale: any informed buyer of real estate would not
pay more for a property than what it would cost to buy the land and build the
structure
general investment strategies - ANSWER--core strategy
-core "plus" strategy
-value added strategy
-opportunistic investing
specialized strategies - ANSWER--property sector investing
-contrarian investing
-market timing
-investing for future growth
-value investing
-investing in "trophy" or "blue chip" properties
-strategy as to size a property
-strategy as to tenants (single vs. multi-tenanted)
-arbitrage investing
-turnaround/ special situation/ liquidation. spin offs
, core strategy - ANSWER-goal of acquiring existing, seasoned, relatively low-risk
properties that are at least 80 percent leased to low risk tenants
core "plus" strategy - ANSWER-combines core investment with a strategy to make
minor changes in the management of the property with a releasing program or by
making very limited and specific minor capital improvements
-changes tend to be very specific and targeted towards increasing rents and
outperforming competing properties in the same submarket
value added strategy - ANSWER-frequently used to focus on some aspect of
properties that are not being optimized
-could involve renovation of an existing property to achieve higher rents
opportunistic investing - ANSWER-involves acquiring properties from investors in
financial difficulty or properties needing renovation, upgrading, or repositioning
-success of investment plan is dependent on the ability to purchase properties at a
discount as well as the exit strategy
property sector investing - ANSWER-based on the belief that over the long term,
based on economic and demographic research, one property type will outperform
other property sectors
contrarian investing - ANSWER-based on the premise that some major economic,
technological, or other event will make the investment outlook for a given property
type poor and "out of favor" among other investors
-contrarian's tend to think investors overreact
market timing - ANSWER-based off the belief that with an understanding of the stage
of each property type in the real estate cycle and future economic conditions, some
investors have the ability to predict when to buy or sell properties
investing for future growth - ANSWER-"discovering" through research those property
types and markets that are likely to experience significant or above-average
appreciation in value
value investing - ANSWER-based on a tried-and-true performance approach where
research is directed toward finding those properties that have been "overlooked" by
investors
investing in "trophy" or "blue chip" properties - ANSWER-only very visible, well
located properties (trophy properties) should be targets for acquisition
strategy as to size of property - ANSWER-based on preference for a subsection
within a property type because investors/ owners believe that they can better
understand the demand for space in that sub sector
Questions with Complete Answers
mortgage-equity capitalization - ANSWER-value of property is estimated by explicitly
taking into consideration the requirements of the mortgage lender and the equity
investor
reconciliation: sales comparison and income capitalization approaches - ANSWER--
sales comparison method: cap rates reflect what investors are CURRENTLY
PAYING for comparable properties
-some properties that have recently sold are not truly comparable to properties
available for purchase
cost approach - ANSWER--rationale: any informed buyer of real estate would not
pay more for a property than what it would cost to buy the land and build the
structure
general investment strategies - ANSWER--core strategy
-core "plus" strategy
-value added strategy
-opportunistic investing
specialized strategies - ANSWER--property sector investing
-contrarian investing
-market timing
-investing for future growth
-value investing
-investing in "trophy" or "blue chip" properties
-strategy as to size a property
-strategy as to tenants (single vs. multi-tenanted)
-arbitrage investing
-turnaround/ special situation/ liquidation. spin offs
, core strategy - ANSWER-goal of acquiring existing, seasoned, relatively low-risk
properties that are at least 80 percent leased to low risk tenants
core "plus" strategy - ANSWER-combines core investment with a strategy to make
minor changes in the management of the property with a releasing program or by
making very limited and specific minor capital improvements
-changes tend to be very specific and targeted towards increasing rents and
outperforming competing properties in the same submarket
value added strategy - ANSWER-frequently used to focus on some aspect of
properties that are not being optimized
-could involve renovation of an existing property to achieve higher rents
opportunistic investing - ANSWER-involves acquiring properties from investors in
financial difficulty or properties needing renovation, upgrading, or repositioning
-success of investment plan is dependent on the ability to purchase properties at a
discount as well as the exit strategy
property sector investing - ANSWER-based on the belief that over the long term,
based on economic and demographic research, one property type will outperform
other property sectors
contrarian investing - ANSWER-based on the premise that some major economic,
technological, or other event will make the investment outlook for a given property
type poor and "out of favor" among other investors
-contrarian's tend to think investors overreact
market timing - ANSWER-based off the belief that with an understanding of the stage
of each property type in the real estate cycle and future economic conditions, some
investors have the ability to predict when to buy or sell properties
investing for future growth - ANSWER-"discovering" through research those property
types and markets that are likely to experience significant or above-average
appreciation in value
value investing - ANSWER-based on a tried-and-true performance approach where
research is directed toward finding those properties that have been "overlooked" by
investors
investing in "trophy" or "blue chip" properties - ANSWER-only very visible, well
located properties (trophy properties) should be targets for acquisition
strategy as to size of property - ANSWER-based on preference for a subsection
within a property type because investors/ owners believe that they can better
understand the demand for space in that sub sector
