CCIM 101 QUESTIONS AND ANSWERS SET A+
✔✔Investor decisions - ✔✔Investors are primarily interested in receiving a return on
investment (yield) that is commensurate with the risk that they will incur by making an
investment.
✔✔Rate of return - ✔✔The rate of return is the percentage return on each dollar
invested for each period it is invested. Rates of return can be estimated on before tax or
an after tax basis
✔✔Acquisition decisions - ✔✔Should investment real estate be acquired?
What type of investment real estate should be acquired?
When should investment real estate be acquired?
Where should investment real estate be acquired?
Which of the available investment real estate alternatives should be acquired?
How should the investment real estate be acquired?
What should be the sources of debt and equity capital?
What should the investment real estate acquisition entity be?
What should the acquisition price and terms of the investment real estate be?
✔✔Investor holding period decisions - ✔✔Should discretionary capital expenditures be
made?
Should the financing structure be changed?
Should the property use be changed?
Should the property be held or sold?
Should the operating strategy be changed?
✔✔Investor disposition decisions - ✔✔What should the disposition price be?
What should the disposition method be?
What should the marketing process be?
✔✔When will investors invest in real estate? - ✔✔Investors will only invest in real estate
if it has an expected return that is competitive with other investment alternatives of
, comparable risk. Real estate competes for investor dollars with other investments
alternatives.
✔✔What two major asset classes compete with real estate for investment capital? -
✔✔To understand the real estate universe, the discussion must involve commercial real
estate as it compares to the tow major asset classes that compete with real estate of
investment capital bonds and stocks.
✔✔Prior to 1960 major institutions invested only in highly liquid bonds. Stocks were
ignored due to a lack of information and transparency. Now - ✔✔Investors are giving
significant attention to another major asset class commercial real estate. Commercial
real estate is a significant portion of the capital market and now considered to be an
asset class like stocks and bonds
✔✔When developing a risk and and return profile for a property you should keep what
important basic concept in mind? - ✔✔Commercial real estate has investment behavior
attributes similar to both the bond market and the stock market. Contract leases behave
like bonds, and the upside created in commercial real estate by re-tenanting and
repositioning simulates the investment characteristics of the stock market. It is often
thought that I leveraged, institutional commercial real estate should provide returns
somewhere in between bonds and stocks.
✔✔How does real estate help to reduce the overall risk of a portfolio - ✔✔The risk and
return of real estate may fall between that of stocks and bonds real estate tends to be
impacted by different economic events that stocks and bonds. Real estate tends to be
better in an inflationary environment. The returns for real estate are not highly correlated
with that of stocks and bonds including real estate in the portfolio tends to smooth out
the performance of the portfolio.
✔✔The bond market - ✔✔Serves as a financing mechanism for corporations. The
corporation issues the bonds, which have set parameters in terms of the repayment
schedule, coupon rate, term, and maturity.
✔✔Simple way to look at bond market - ✔✔As the investor serving as the lender, and
the entity (I.e., the corporation) issuing the bond serves as the borrower. Bonds are also
known as fixed-income securities because the investor knows how much they get and
when the bond will mature or be repaid.
✔✔Government issued bonds. - ✔✔Are known as treasury bonds. The structure and
pricing of government bonds are identical to that of corporate bonds however
government bonds typically are referred to as risk-fee-bonds as they essentially have no
risk of default.
✔✔Stock market - ✔✔Also serves as a financing mechanism for corporation, although
without a set repayment schedule or set interest rate. When the corporation issues
✔✔Investor decisions - ✔✔Investors are primarily interested in receiving a return on
investment (yield) that is commensurate with the risk that they will incur by making an
investment.
✔✔Rate of return - ✔✔The rate of return is the percentage return on each dollar
invested for each period it is invested. Rates of return can be estimated on before tax or
an after tax basis
✔✔Acquisition decisions - ✔✔Should investment real estate be acquired?
What type of investment real estate should be acquired?
When should investment real estate be acquired?
Where should investment real estate be acquired?
Which of the available investment real estate alternatives should be acquired?
How should the investment real estate be acquired?
What should be the sources of debt and equity capital?
What should the investment real estate acquisition entity be?
What should the acquisition price and terms of the investment real estate be?
✔✔Investor holding period decisions - ✔✔Should discretionary capital expenditures be
made?
Should the financing structure be changed?
Should the property use be changed?
Should the property be held or sold?
Should the operating strategy be changed?
✔✔Investor disposition decisions - ✔✔What should the disposition price be?
What should the disposition method be?
What should the marketing process be?
✔✔When will investors invest in real estate? - ✔✔Investors will only invest in real estate
if it has an expected return that is competitive with other investment alternatives of
, comparable risk. Real estate competes for investor dollars with other investments
alternatives.
✔✔What two major asset classes compete with real estate for investment capital? -
✔✔To understand the real estate universe, the discussion must involve commercial real
estate as it compares to the tow major asset classes that compete with real estate of
investment capital bonds and stocks.
✔✔Prior to 1960 major institutions invested only in highly liquid bonds. Stocks were
ignored due to a lack of information and transparency. Now - ✔✔Investors are giving
significant attention to another major asset class commercial real estate. Commercial
real estate is a significant portion of the capital market and now considered to be an
asset class like stocks and bonds
✔✔When developing a risk and and return profile for a property you should keep what
important basic concept in mind? - ✔✔Commercial real estate has investment behavior
attributes similar to both the bond market and the stock market. Contract leases behave
like bonds, and the upside created in commercial real estate by re-tenanting and
repositioning simulates the investment characteristics of the stock market. It is often
thought that I leveraged, institutional commercial real estate should provide returns
somewhere in between bonds and stocks.
✔✔How does real estate help to reduce the overall risk of a portfolio - ✔✔The risk and
return of real estate may fall between that of stocks and bonds real estate tends to be
impacted by different economic events that stocks and bonds. Real estate tends to be
better in an inflationary environment. The returns for real estate are not highly correlated
with that of stocks and bonds including real estate in the portfolio tends to smooth out
the performance of the portfolio.
✔✔The bond market - ✔✔Serves as a financing mechanism for corporations. The
corporation issues the bonds, which have set parameters in terms of the repayment
schedule, coupon rate, term, and maturity.
✔✔Simple way to look at bond market - ✔✔As the investor serving as the lender, and
the entity (I.e., the corporation) issuing the bond serves as the borrower. Bonds are also
known as fixed-income securities because the investor knows how much they get and
when the bond will mature or be repaid.
✔✔Government issued bonds. - ✔✔Are known as treasury bonds. The structure and
pricing of government bonds are identical to that of corporate bonds however
government bonds typically are referred to as risk-fee-bonds as they essentially have no
risk of default.
✔✔Stock market - ✔✔Also serves as a financing mechanism for corporation, although
without a set repayment schedule or set interest rate. When the corporation issues
