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Solutions to Questions – Chapter 1 Real Estate Investment: Basic Legal Concepts Question 1-1 What is the difference between real property and personal property? Real property refers to the ownership rights associated with realty. Realty refers to land and all […]

Solution to Questions – Chapter 10 Valuation of Income Properties: Appraisal and the Market for Capital Question 10-1 What is the economic rationale for the cost approach? Under what conditions would the cost approach tend to give the best value […]

(4) styles: Core, Core Plus, Value Added, Opportunistic Under Core: Office Properties Trophy Properties Gateway Markets Under Core Plus: Properties to be re-tenanted Properties needing minor capital improvements Properties to be leveraged Under Value Added: Properties with excess land to […]

Solutions to Questions – Chapter 12 Financial Leverage and Financing Alternatives Question 12-1 What is financial leverage? Why is a one-year measure of return on investment inadequate in determining whether positive or negative financial leverage exists? Financial leverage is defined […]

Year 1 2 3 4 5 NOI 475,000 489,250 503,928 519,045 534,617 Debt Service 0 0 0 0 0 Before-tax Cash Flow 475,000 489,250 503,928 519,045 534,617 Equity Participation 0 0 0 0 0 Cash Flow after Participation 475,000 489,250 […]

Solutions to Questions – Chapter 13 Risk Analysis Question 13-1 What is meant by partitioning the internal rate of return? Why is this procedure meaningful? To illustrate what is meant by partitioning the IRR, remember that the IRR is made […]

14-1 Solutions to Questions – Chapter 14 Disposition and Renovation of Income Properties Question 14-1 What factors should an investor consider when trying to decide whether to dispose of a property that he has owned for several years? Question 14-2 […]

Solutions to Questions – Chapter 15 Financing Corporate Real Estate Question 15-1 What are the main reasons that corporations may choose to own real estate? There are a number of reasons a corporation may decide to own (rather than lease) […]

Solutions to Questions – Chapter 16 Financing Project Development Question 16-1 What are the sources of risk associated with project development? Sources of risk associated with project development include market risks and project risks. Market risks are the result of […]

Solutions to Questions – Chapter 17 Financing Land Development Projects Question 17-1 How might land development activities be specialized? Why is this activity different from project development discussed in the preceding chapter? Firms can specialize in the acquiring raw land […]

Solutions to Questions – Chapter 18 Structuring Real Estate Investments: Organizational Forms and Joint Ventures Question 18-1 What is the difference between an IRR preference and an IRR lookback? With an IRR preference the investor receives all additional cash flow […]

Solutions to Questions – Chapter 19 The Secondary Mortgage Market: Pass-Through Securities Question 19-1 What is the secondary mortgage market? List three reasons why it is important. The secondary mortgage market is the “after” market in which mortgages are sold […]

Solutions to Questions – Chapter 2 Real Estate Financing: Notes and Mortgages Question 2-1 Distinguish between a mortgage and a note. A note admits the debt and generally makes the borrower personally liable for the obligation. A mortgage is usually […]

Solution to Questions – Chapter 20 The Secondary Mortgage Market: CMOs and Derivative Securities Question 20-1 What is a mortgage pay-through bond (MPTB)? How does it resemble a mortgage-backed bond (MBB)? How does it differ? MPTBs are issued against mortgage […]

Chapter 21—Real Estate Investment Trusts (REITs) Solutions to Questions—Chapter 21 Real Estate Investment Trusts (REITs) Question 21-1 What are the general requirements regarding income, investments, and dividends with which a REIT must comply to maintain its qualification to be taxed […]

Solutions to Questions – Chapter 22 Real Estate Investment Performance and Portfolio Considerations Question 22-1 What are some of the difficulties of obtaining data to measure real estate investment performance? It is difficult obtaining data to measure real estate investment […]

Solutions to Questions – Chapter 23 Real Estate Investment Funds: S tructure , P erformance , Benchmarking, and Attribution Analysis Question 23-1 What are the primary differences between an open-end and closed-end fund? Why would an investor choose to invest […]

Solutions to Questions – Chapter 3 Mortgage Loan Foundations: The Time Value of Money Question 3-1 What is the essential concept in understanding compound interest? The concept of earning interest on interest is the essential idea that must be understood […]

Solutions to Questions – Chapter 4 Fixed Interest Rate Mortgage Loans Question 4-1 What are the major differences between the CAM, and CPM loans? What are the advantages to borrowers and risks to lenders for each? What elements do each […]

(d) Include prepayment penalty of 2% of $83,186.41 or $1,663.73 Solution i: PV = $-84,000 PMT = $642.04 n = 60 FV = $84,850.14 i = 9.33% effective rate Problem 4-15 Points required to achieve a yield to 10% for […]

Solutions to Questions – Chapter 5 Adjustable and Floating Rate Mortgage Loans Question 5-1 In the previous chapter, significant problems regarding the ability of borrowers to meet mortgage payments and the evolution of fixed interest rate mortgages with various payment […]

Solutions to Questions – Chapter 6 Mortgages: Additional Concepts, Analysis, and Applications Question 6-1 What are the primary considerations that should be made when refinancing? The borrower must determine whether to present value of the savings in monthly payments is […]

Solutions to Questions – Chapter 7 Single Family Housing: Pricing, Investment and Tax Considerations Question 7-1 Why is the income approach to value often difficult to use on a single family residential appraisal? Typically, the income approach is difficult to […]

Solution to Questions – Chapter 8 Underwriting and Financing Residential Properties Question 8-1 What is the legislative intent of federal truth-in-lending disclosures, and what specific disclosures are required under the act? The intent of FTL legislation is to require that […]

Solutions to Questions – Chapter 9 Income-Producing Properties: Leases, Rents, and the Market for Space Question 9-1 How does the use of leases shift the risk of rising operating expenses from lessor to the lessee? Leases determine how much risk […]

Real Estate Finance & Investments, 16e (Brueggeman) Chapter 1 Real Estate Investment: Basic Legal Concepts 1) Real estate refers to the physical land and improvements constructed on the land. Answer: TRUE Difficulty: 1 Easy Topic: Property rights Accessibility: Keyboard Navigation […]

Real Estate Finance & Investments, 16e (Brueggeman) Chapter 10 Valuation of Income Properties: Appraisal and the Market for Capital 1) The sales comparison approach to appraisal is preferred because it is the only objective appraisal approach. Answer: FALSE Difficulty: 2 […]

Real Estate Finance & Investments, 16e (Brueggeman) Chapter 11 Investment Analysis and Taxation of Income Properties 1) Debt coverage ratio measures the degree to which the NOI from the property is expected to exceed the mortgage payment. Answer: TRUE Difficulty: […]

Real Estate Finance & Investments, 16e (Brueggeman) Chapter 12 Financial Leverage and Financing Alternatives 1) Financial leverage is defined as benefits that may result to an investor by borrowing money at a rate of interest that is lower than the […]

Real Estate Finance & Investments, 16e (Brueggeman) Chapter 13 Risk Analysis 1) Partitioning the internal rate of return is useful because it helps the investor to determine how much of the return is from annual operating cash flow and how […]

Real Estate Finance & Investments, 16e (Brueggeman) Chapter 14 Disposition and Renovation of Income Properties 1) One factor an investor should consider when trying to decide whether to dispose of a property he or she has owned for several years […]

Real Estate Finance & Investments, 16e (Brueggeman) Chapter 15 Financing Corporate Real Estate 1) For a large corporation with a good credit rating seeking to finance corporate real estate, the cost of a mortgage loan may be greater than the […]

Real Estate Finance & Investments, 16e (Brueggeman) Chapter 16 Financing Project Development 1) One of the risks of project development is “project risks,” which are the result of unexpected changes in general market conditions affecting the supply and demand for […]

Real Estate Finance & Investments, 16e (Brueggeman) Chapter 17 Financing Land Development Projects 1) Option contracts are used to reserve a parcel of land so that it will not be sold to someone else, while the developer does preliminary analysis […]

Real Estate Finance & Investments, 16e (Brueggeman) Chapter 18 Structuring Real Estate Investments: Organizational Forms and Joint Ventures 1) An IRR preference will always give the investor a return that is equal to or better than what the return would […]

Real Estate Finance & Investments, 16e (Brueggeman) Chapter 19 The Secondary Mortgage Market: Pass-Through Securities 1) In 2008, Fannie Mae was spun off in an initial public offering as a private company. Answer: FALSE Difficulty: 2 Medium Topic: Secondary mortgage […]

Real Estate Finance & Investments, 16e (Brueggeman) Chapter 2 Real Estate Financing: Notes and Mortgages 1) A mortgage is the same thing as a note. Answer: FALSE Difficulty: 1 Easy Topic: Mortgages Accessibility: Keyboard Navigation Gradable: automatic 2) A non-recourse […]

Real Estate Finance & Investments, 16e (Brueggeman) Chapter 20 The Secondary Mortgage Market: CMOs and Derivative Securities 1) One way in which a mortgage pay-through bond (MPTB) is similar to a mortgage-backed bond (MBB) is that the pay-through bond is […]

Real Estate Finance & Investments, 16e (Brueggeman) Chapter 21 Real Estate Investment Trusts (REITs) 1) At least 95 percent of the value of a REIT’s assets must consist of real estate assets, cash, and government securities. Answer: FALSE Difficulty: 2 […]

Real Estate Finance & Investments, 16e (Brueggeman) Chapter 22 Real Estate Investment Performance and Portfolio Considerations 1) It is difficult to compare the investment performance of real estate with stocks and bonds because when investment properties do sell, the sale […]

Real Estate Finance & Investments, 16e (Brueggeman) Chapter 23 Real Estate Investment Funds: Structure, Performance, Benchmarking, and Attribution Analysis 1) Investments that are held “in trust” on behalf of a pension plan’s beneficiaries cause the fiduciary duties and responsibilities of […]

Real Estate Finance & Investments, 16e (Brueggeman) Chapter 3 Mortgage Loan Foundations: The Time Value of Money 1) In order to solve a compounding problem, you must know all four of the variables in order to solve for the fifth […]

Real Estate Finance & Investments, 16e (Brueggeman) Chapter 4 Fixed Interest Rate Mortgage Loans 1) Inflation makes very little difference to lenders of and investors needing money. Answer: FALSE Difficulty: 1 Easy Topic: Mortgage characteristics Accessibility: Keyboard Navigation Gradable: automatic […]

Real Estate Finance & Investments, 16e (Brueggeman) Chapter 5 Adjustable and Floating Rate Mortgage Loans 1) ARMs were developed because lenders were tired of offering a limited selection of loan alternatives to borrowers. Answer: FALSE Difficulty: 1 Easy Topic: ARMs […]

Real Estate Finance & Investments, 16e (Brueggeman) Chapter 6 Mortgages: Additional Concepts, Analysis, and Applications 1) A borrower finds that the incremental cost of borrowing an extra $10,000 is 14%. The borrower can earn 12% on alternative investments of comparable […]

Real Estate Finance & Investments, 16e (Brueggeman) Chapter 7 Single-Family Housing: Pricing, Investment, and Tax Considerations 1) If the cost of rental housing increases relative to house prices, demand for purchased housing tends to increase. Answer: TRUE Difficulty: 1 Easy […]

Real Estate Finance & Investments, 16e (Brueggeman) Chapter 8 Underwriting and Financing Residential Properties 1) For a loan with an LTV greater than 80 percent, the costs of mortgage insurance always exceed the costs of second lien financing. Answer: FALSE […]

Real Estate Finance & Investments, 16e (Brueggeman) Chapter 9 Income-Producing Properties: Leases, Rents, and the Market for Space 1) Analysis of effective rents tends to be superior to analysis of total rents over the life of a lease. Answer: TRUE […]