REE3043 FSU-Broxterman
Foundations Exam 1 Review
Questions and Correct Answers 2026
Updated.
Real Estate - Answer Land and permanent improvements, whether natural or artificial.
Defining characteristic: immovable
Realty - Answer immovable possessions
Chattel - Answer moveable possessions
Types of Real Estate Categories used by Lenders - Answer Residential, Commercial, and Land
Residential- Lenders - Answer -1 to 4 unit buildings and land suitable for dwelling use
-"unit" means it has own entrance, kitchen, and bath
Commercial- Lenders - Answer -All real estate other than residential
-Including 4+ unit multi-family dwellings (apartments, condos)
Land- Lenders - Answer -raw land: still in natural state
-improved site: some upgrades that make it more usable. example: utility connections, sewer
piping, electrical/gas connections, etc.
Types of Real Estate Categories used by Investors - Answer Residential, Office, Industrial,
Retail, Specialty
Residential- Investors - Answer -single family, multi family
Industrial- Investors - Answer manufacturing, warehouse, flex/R&D
Retail- Investors - Answer -mall
-neighborhood, power, lifestyle centers
Specialty- Investors - Answer lodging (ex. hotel properties), medical, senior, storage, student
, "four food groups" - Answer Multi-family residential, Office, Industrial, Retail
-"ROIM"
Quality of Physical Asset- Metropolitan Based - Answer Class A, Class B, Class C
Class A - Answer -commands highest rent
-most prestigious locations, tenants, and amenities
-low effective age
Class B - Answer -lower rent than class A
-less desirable location/amenities
Class C - Answer -older with renovation needed, still reasonably well maintained
-lower credit tenants
Geography - Answer -Primary (Tier 1), Secondary (Tier 2), Tertiary (Tier 3)
-Gateway cities: think most important real estate markets in the world (ex. Boston, Chicago, LA,
New York, Miami, etc.)
User (Space) Market - Answer Trade use of real estate space for money
-Demanders: tenants, owner occupants
-Suppliers: property owners
*Market where RENTS are determined
-Local and segmented, supply and demand
Capital (Asset) Market - Answer Trade rights to receive cash flows generated by real estate
-competes for funds with other asset classes, such as stocks and bonds
*Market where REQUIRED RETURNS are determined
-based on other investment opportunities, not as segmented as user market
Valuation - Answer asset values are determined by interaction of user and capital markets
Methods for converting rent flow into asset value:
-Capitalization: divide single year of expected net income by cap rate
-Discounting: find present value of expected net income using required rate of return
Foundations Exam 1 Review
Questions and Correct Answers 2026
Updated.
Real Estate - Answer Land and permanent improvements, whether natural or artificial.
Defining characteristic: immovable
Realty - Answer immovable possessions
Chattel - Answer moveable possessions
Types of Real Estate Categories used by Lenders - Answer Residential, Commercial, and Land
Residential- Lenders - Answer -1 to 4 unit buildings and land suitable for dwelling use
-"unit" means it has own entrance, kitchen, and bath
Commercial- Lenders - Answer -All real estate other than residential
-Including 4+ unit multi-family dwellings (apartments, condos)
Land- Lenders - Answer -raw land: still in natural state
-improved site: some upgrades that make it more usable. example: utility connections, sewer
piping, electrical/gas connections, etc.
Types of Real Estate Categories used by Investors - Answer Residential, Office, Industrial,
Retail, Specialty
Residential- Investors - Answer -single family, multi family
Industrial- Investors - Answer manufacturing, warehouse, flex/R&D
Retail- Investors - Answer -mall
-neighborhood, power, lifestyle centers
Specialty- Investors - Answer lodging (ex. hotel properties), medical, senior, storage, student
, "four food groups" - Answer Multi-family residential, Office, Industrial, Retail
-"ROIM"
Quality of Physical Asset- Metropolitan Based - Answer Class A, Class B, Class C
Class A - Answer -commands highest rent
-most prestigious locations, tenants, and amenities
-low effective age
Class B - Answer -lower rent than class A
-less desirable location/amenities
Class C - Answer -older with renovation needed, still reasonably well maintained
-lower credit tenants
Geography - Answer -Primary (Tier 1), Secondary (Tier 2), Tertiary (Tier 3)
-Gateway cities: think most important real estate markets in the world (ex. Boston, Chicago, LA,
New York, Miami, etc.)
User (Space) Market - Answer Trade use of real estate space for money
-Demanders: tenants, owner occupants
-Suppliers: property owners
*Market where RENTS are determined
-Local and segmented, supply and demand
Capital (Asset) Market - Answer Trade rights to receive cash flows generated by real estate
-competes for funds with other asset classes, such as stocks and bonds
*Market where REQUIRED RETURNS are determined
-based on other investment opportunities, not as segmented as user market
Valuation - Answer asset values are determined by interaction of user and capital markets
Methods for converting rent flow into asset value:
-Capitalization: divide single year of expected net income by cap rate
-Discounting: find present value of expected net income using required rate of return
