Commercial Real Estate Exam Answered
A+ Pass
Tenant Improvements (TI) - Answers -✔✔ Changes or upgrades made to a rental
property to customize the space for the specific needs of a tenant.
Net Operating Income (NOI) - Answers -✔✔ The total income generated by a property
after subtracting operating expenses, excluding loan payments. Calculated as Gross
Income - Operating Expenses.
Loan-to-Cost (LTC) Ratio - Answers -✔✔ A percentage showing how much of the
project's total cost a lender is willing to finance. Calculated as (Loan Amount / Project
Cost) x 100.
Indicated Loan Amount - Answers -✔✔ The initial loan amount a lender would consider
based on the Loan-to-Cost (LTC) ratio before adjustments for other factors like income
and debt coverage.
Debt Coverage Ratio (DCR) - Answers -✔✔ A measure of a property's ability to cover
its debt payments with its Net Operating Income (NOI).
Available for Annual Debt Service - Answers -✔✔ The maximum amount of debt
payments that can be supported by the property's Net Operating Income (NOI), based
on the Debt Coverage Ratio (DCR).
Interest Rate - Answers -✔✔ The annual percentage rate charged by a lender on the
loan amount. This rate determines the cost of borrowing.
Rent per Square Foot - Answers -✔✔ The amount of rent income generated per square
foot of rentable property area. This measure is used to estimate total rental income
based on the building's size.
Annual Rent Growth Rate - Answers -✔✔ The expected annual percentage increase in
rent, used to forecast future rent income.
Effective Gross Income (EGI) - Answers -✔✔ The total income a property generates
after accounting for losses from vacancies or unpaid rent (credit losses).
Gross Schedule Income (GSI) - Answers -✔✔ The total potential income the property
could generate if all units were rented at full market rate, with no vaccines, for the entire
year.
, White Box Upgrade - Answers -✔✔ When a space is prepared with the basics like walls,
ceilings, flooring, plumbing, and electrical systems, but no custom finishes. It's a blank,
functional space that tenants can design to fit their needs.
Slab Allowance - Answers -✔✔ Budget or amount set aside by a landlord or developer
to cover costs related to installing or modifying a concrete slab. This can include pouring
a new slab, leveling an existing one, or making structural adjustments for tenant
improvements. It's often part of a lease negotiation to ensure the tenant's specific
needs, such as plumbing or layout changes, are met.
Impact Fees - Answers -✔✔ Charges imposed by local governments on developers to
offset the costs of new infrastructure or services needed due to the development. These
fees help fund public resources like roads, schools, water systems, and emergency
services that will support the new project. They ensure the costs of growth are shared
between the developer and the community.
Contingency Reserve - Answers -✔✔ Set amount of money set aside in a project
budget to cover unexpected costs or risks. These funds act as a financial safety net to
handle unforeseen expenses, like construction delays, material price increases, or
design changes, without exceeding the overall budget.
Indirect Cost - Answers -✔✔ Expenses that are not directly tied to physical construction
or development but are necessary to complete the project. These include costs like
project management, permits, design fees, insurance, legal fees, and financing charges.
Gross Income - Answers -✔✔ total income generated from a property before deducting
any expenses. This includes rental income, parking fees, and any other revenue
streams associated with the property. It represents the property's earning potential.
Tenant Improvement Rent - Answers -✔✔ the portion of rent that a tenant pays to cover
the cost of tenant improvements made to the leased space. These improvements are
typically negotiated in the lease and may include customizations like office layouts,
flooring, or fixtures. TI rent allows landlords to recover the cost of the upgrades over the
lease term.
Total Gross Income - Answers -✔✔ the total revenue a property generates before any
expenses are deducted. It includes all income sources, such as:
1. Rental Income: Payments from tenants for leasing space.
2. Other Revenue: Income from parking fees, signage, vending machines, or additional
services offered on the property.
Less Vacancy Factor - Answers -✔✔ the deduction made from a property's total gross
income to account for potential income lost due to vacant units or unleased spaces.
This factor is typically expressed as a percentage and reflects the expected average
A+ Pass
Tenant Improvements (TI) - Answers -✔✔ Changes or upgrades made to a rental
property to customize the space for the specific needs of a tenant.
Net Operating Income (NOI) - Answers -✔✔ The total income generated by a property
after subtracting operating expenses, excluding loan payments. Calculated as Gross
Income - Operating Expenses.
Loan-to-Cost (LTC) Ratio - Answers -✔✔ A percentage showing how much of the
project's total cost a lender is willing to finance. Calculated as (Loan Amount / Project
Cost) x 100.
Indicated Loan Amount - Answers -✔✔ The initial loan amount a lender would consider
based on the Loan-to-Cost (LTC) ratio before adjustments for other factors like income
and debt coverage.
Debt Coverage Ratio (DCR) - Answers -✔✔ A measure of a property's ability to cover
its debt payments with its Net Operating Income (NOI).
Available for Annual Debt Service - Answers -✔✔ The maximum amount of debt
payments that can be supported by the property's Net Operating Income (NOI), based
on the Debt Coverage Ratio (DCR).
Interest Rate - Answers -✔✔ The annual percentage rate charged by a lender on the
loan amount. This rate determines the cost of borrowing.
Rent per Square Foot - Answers -✔✔ The amount of rent income generated per square
foot of rentable property area. This measure is used to estimate total rental income
based on the building's size.
Annual Rent Growth Rate - Answers -✔✔ The expected annual percentage increase in
rent, used to forecast future rent income.
Effective Gross Income (EGI) - Answers -✔✔ The total income a property generates
after accounting for losses from vacancies or unpaid rent (credit losses).
Gross Schedule Income (GSI) - Answers -✔✔ The total potential income the property
could generate if all units were rented at full market rate, with no vaccines, for the entire
year.
, White Box Upgrade - Answers -✔✔ When a space is prepared with the basics like walls,
ceilings, flooring, plumbing, and electrical systems, but no custom finishes. It's a blank,
functional space that tenants can design to fit their needs.
Slab Allowance - Answers -✔✔ Budget or amount set aside by a landlord or developer
to cover costs related to installing or modifying a concrete slab. This can include pouring
a new slab, leveling an existing one, or making structural adjustments for tenant
improvements. It's often part of a lease negotiation to ensure the tenant's specific
needs, such as plumbing or layout changes, are met.
Impact Fees - Answers -✔✔ Charges imposed by local governments on developers to
offset the costs of new infrastructure or services needed due to the development. These
fees help fund public resources like roads, schools, water systems, and emergency
services that will support the new project. They ensure the costs of growth are shared
between the developer and the community.
Contingency Reserve - Answers -✔✔ Set amount of money set aside in a project
budget to cover unexpected costs or risks. These funds act as a financial safety net to
handle unforeseen expenses, like construction delays, material price increases, or
design changes, without exceeding the overall budget.
Indirect Cost - Answers -✔✔ Expenses that are not directly tied to physical construction
or development but are necessary to complete the project. These include costs like
project management, permits, design fees, insurance, legal fees, and financing charges.
Gross Income - Answers -✔✔ total income generated from a property before deducting
any expenses. This includes rental income, parking fees, and any other revenue
streams associated with the property. It represents the property's earning potential.
Tenant Improvement Rent - Answers -✔✔ the portion of rent that a tenant pays to cover
the cost of tenant improvements made to the leased space. These improvements are
typically negotiated in the lease and may include customizations like office layouts,
flooring, or fixtures. TI rent allows landlords to recover the cost of the upgrades over the
lease term.
Total Gross Income - Answers -✔✔ the total revenue a property generates before any
expenses are deducted. It includes all income sources, such as:
1. Rental Income: Payments from tenants for leasing space.
2. Other Revenue: Income from parking fees, signage, vending machines, or additional
services offered on the property.
Less Vacancy Factor - Answers -✔✔ the deduction made from a property's total gross
income to account for potential income lost due to vacant units or unleased spaces.
This factor is typically expressed as a percentage and reflects the expected average
