CCIM 101 – Commercial Real Estate Financial
Analysis Review (2025–2026) Focus: Cash-flow
modeling, cap rates, ROI calculations, investment
analysis, and financial decision-making principles.
1. What is the primary goal of most commercial real estate investors?
A) To maximize occupancy
B) To maximize property appreciation
C) To maximize risk
D) To maximize returns relative to risk ✓
2. The concept that a dollar today is worth more than a dollar in the future is known as:
A) Inflation
B) Time Value of Money (TVM) ✓
C) Opportunity Cost
D) Leverage
3. Which of the following best describes "leverage" in real estate?
A) The ability to influence tenants
B) The use of borrowed capital to increase the potential return of an investment ✓
C) The ratio of debt to equity
D) The force used to open a heavy door
4. A "stabilized" property in commercial real estate analysis typically refers to a property that:
A) Has no debt
B) Is fully occupied at market rents for a reasonable period ✓
C) Is brand new and has never been occupied
D) Has long-term, below-market leases
5. The internal rate of return (IRR) is best described as:
A) The discount rate that makes the net present value of all cash flows equal to zero ✓
B) The average annual return on an investment
C) The capitalization rate divided by the discount rate
D) The return after accounting for inflation
Income & Expense Analysis
,6. Potential Gross Income (PGI) is calculated as:
A) Total collected rent from all tenants
B) Total possible income if the property were 100% leased at market rents ✓
C) PGI minus vacancy and credit losses
D) Net Operating Income minus debt service
7. Vacancy and Credit Loss is typically expressed as:
A) A fixed dollar amount
B) A percentage of Potential Gross Income ✓
C) A percentage of Effective Gross Income
D) A percentage of Net Operating Income
8. Effective Gross Income (EGI) is calculated as:
A) Potential Gross Income + Other Income
B) Potential Gross Income - Vacancy and Credit Loss
C) Potential Gross Income - Vacancy and Credit Loss + Other Income ✓
D) Net Operating Income - Capital Expenditures
9. Which of the following is NOT considered an operating expense?
A) Property taxes
B) Property management fees
C) Utilities
D) Mortgage payments (debt service) ✓
10. Net Operating Income (NOI) is a key metric because it measures:
A) The property's income after all expenses, including financing
B) The property's income before depreciation and financing costs ✓
C) The cash flow available to the equity investor
D) The taxable income from the property
11. A "triple-net lease" (NNN) requires the tenant to pay:
A) Base rent only
B) Base rent, property taxes, and insurance
C) Base rent, property taxes, insurance, and maintenance ✓
D) Base rent and utilities
12. A capital expenditure (CapEx) is best described as:
A) A recurring expense for day-to-day operations
B) An expense for replacing a major component of the property, like a roof ✓
,C) The initial cost of acquiring the property
D) The cost of tenant improvements for a new lease
13. A "below-market" lease is generally considered:
A) A liability to the property value ✓
B) An asset to the property value
C) Neutral to the property value
D) A sign of poor property management
14. The amount of rent a property would most likely command in the competitive open
market is known as:
A) Contract Rent
B) Effective Rent
C) Market Rent ✓
D) Escalated Rent
15. When a property's actual income is less than its potential due to temporary economic
downturns, this is known as:
A) Physical vacancy
B) Economic vacancy ✓
C) Frictional vacancy
D) Credit loss
Valuation & Cap Rates
16. The Capitalization Rate (Cap Rate) is calculated as:
A) Net Operating Income / Purchase Price ✓
B) Purchase Price / Net Operating Income
C) Effective Gross Income / Purchase Price
D) Net Operating Income / Total Investment
17. All else being equal, a property with a higher cap rate implies:
A) Lower risk and lower return
B) Higher risk and higher return ✓
C) Higher quality and lower risk
D) Lower price and lower risk
18. The direct capitalization method of valuation is best summarized by which formula?
A) Value = NOI / Cap Rate ✓
, B) Value = PGI / Cap Rate
C) Value = EGI / Cap Rate
D) Value = Discount Rate / NOI
19. If a property has a Net Operating Income of $1,000,000 and is valued at $12,500,000, what
is its cap rate?
A) 8.0% ✓
B) 10.0%
C) 12.5%
D) 125.0%
20. A market-derived cap rate is primarily a measure of:
A) The property's historical performance
B) The overall return on a property without debt
C) Market sentiment and perceived risk for a particular property type and location ✓
D) The rate at which income is expected to grow
21. The process of converting future income into a present value is known as:
A) Amortization
B) Capitalization ✓
C) Depreciation
D) Accrual
22. If Market Cap Rates are compressing (decreasing), what typically happens to property
values, assuming stable NOI?
A) Values decrease
B) Values increase ✓
C) Values remain the same
D) The effect on value is unknown
23. The "band of investment" technique for developing a cap rate is based on the weighted
average of:
A) The returns required by the lender and the equity investor ✓
B) The cap rates of comparable properties
C) The property's NOI and EGI
D) The risk-free rate and the property's beta
Debt & Leverage Analysis
Analysis Review (2025–2026) Focus: Cash-flow
modeling, cap rates, ROI calculations, investment
analysis, and financial decision-making principles.
1. What is the primary goal of most commercial real estate investors?
A) To maximize occupancy
B) To maximize property appreciation
C) To maximize risk
D) To maximize returns relative to risk ✓
2. The concept that a dollar today is worth more than a dollar in the future is known as:
A) Inflation
B) Time Value of Money (TVM) ✓
C) Opportunity Cost
D) Leverage
3. Which of the following best describes "leverage" in real estate?
A) The ability to influence tenants
B) The use of borrowed capital to increase the potential return of an investment ✓
C) The ratio of debt to equity
D) The force used to open a heavy door
4. A "stabilized" property in commercial real estate analysis typically refers to a property that:
A) Has no debt
B) Is fully occupied at market rents for a reasonable period ✓
C) Is brand new and has never been occupied
D) Has long-term, below-market leases
5. The internal rate of return (IRR) is best described as:
A) The discount rate that makes the net present value of all cash flows equal to zero ✓
B) The average annual return on an investment
C) The capitalization rate divided by the discount rate
D) The return after accounting for inflation
Income & Expense Analysis
,6. Potential Gross Income (PGI) is calculated as:
A) Total collected rent from all tenants
B) Total possible income if the property were 100% leased at market rents ✓
C) PGI minus vacancy and credit losses
D) Net Operating Income minus debt service
7. Vacancy and Credit Loss is typically expressed as:
A) A fixed dollar amount
B) A percentage of Potential Gross Income ✓
C) A percentage of Effective Gross Income
D) A percentage of Net Operating Income
8. Effective Gross Income (EGI) is calculated as:
A) Potential Gross Income + Other Income
B) Potential Gross Income - Vacancy and Credit Loss
C) Potential Gross Income - Vacancy and Credit Loss + Other Income ✓
D) Net Operating Income - Capital Expenditures
9. Which of the following is NOT considered an operating expense?
A) Property taxes
B) Property management fees
C) Utilities
D) Mortgage payments (debt service) ✓
10. Net Operating Income (NOI) is a key metric because it measures:
A) The property's income after all expenses, including financing
B) The property's income before depreciation and financing costs ✓
C) The cash flow available to the equity investor
D) The taxable income from the property
11. A "triple-net lease" (NNN) requires the tenant to pay:
A) Base rent only
B) Base rent, property taxes, and insurance
C) Base rent, property taxes, insurance, and maintenance ✓
D) Base rent and utilities
12. A capital expenditure (CapEx) is best described as:
A) A recurring expense for day-to-day operations
B) An expense for replacing a major component of the property, like a roof ✓
,C) The initial cost of acquiring the property
D) The cost of tenant improvements for a new lease
13. A "below-market" lease is generally considered:
A) A liability to the property value ✓
B) An asset to the property value
C) Neutral to the property value
D) A sign of poor property management
14. The amount of rent a property would most likely command in the competitive open
market is known as:
A) Contract Rent
B) Effective Rent
C) Market Rent ✓
D) Escalated Rent
15. When a property's actual income is less than its potential due to temporary economic
downturns, this is known as:
A) Physical vacancy
B) Economic vacancy ✓
C) Frictional vacancy
D) Credit loss
Valuation & Cap Rates
16. The Capitalization Rate (Cap Rate) is calculated as:
A) Net Operating Income / Purchase Price ✓
B) Purchase Price / Net Operating Income
C) Effective Gross Income / Purchase Price
D) Net Operating Income / Total Investment
17. All else being equal, a property with a higher cap rate implies:
A) Lower risk and lower return
B) Higher risk and higher return ✓
C) Higher quality and lower risk
D) Lower price and lower risk
18. The direct capitalization method of valuation is best summarized by which formula?
A) Value = NOI / Cap Rate ✓
, B) Value = PGI / Cap Rate
C) Value = EGI / Cap Rate
D) Value = Discount Rate / NOI
19. If a property has a Net Operating Income of $1,000,000 and is valued at $12,500,000, what
is its cap rate?
A) 8.0% ✓
B) 10.0%
C) 12.5%
D) 125.0%
20. A market-derived cap rate is primarily a measure of:
A) The property's historical performance
B) The overall return on a property without debt
C) Market sentiment and perceived risk for a particular property type and location ✓
D) The rate at which income is expected to grow
21. The process of converting future income into a present value is known as:
A) Amortization
B) Capitalization ✓
C) Depreciation
D) Accrual
22. If Market Cap Rates are compressing (decreasing), what typically happens to property
values, assuming stable NOI?
A) Values decrease
B) Values increase ✓
C) Values remain the same
D) The effect on value is unknown
23. The "band of investment" technique for developing a cap rate is based on the weighted
average of:
A) The returns required by the lender and the equity investor ✓
B) The cap rates of comparable properties
C) The property's NOI and EGI
D) The risk-free rate and the property's beta
Debt & Leverage Analysis
