Suppose that a developer pre-leases space to a financially strong, national tenant such
as Home Depot, without having yet built the structure in which they will be leasing
space. This is more commonly referred to as a:
A. ground lease
B. build-to-suit
C. design-build
D. contract for deed
A developer’s selection of an architect is a vital step in the development process as the
architect fulfills a number of important roles throughout the life of the project. As
compensation for contributions in the design phase, the architect is often given a
percentage of the construction cost. For moderately complex designs, the average
compensation will be:
A. 1 to 2%
B. 3 to 7%
C. 7 to 10%
D. greater than 10%
Given the following information, calculate the going-out cap rate. Estimated holding
period: 5 years, NOI for year 1: $120,000, NOI for year 5: $150,000, NOI for year 6:
$155,250, Expected sale price at end of year 5: $1,350,000.
A. 8.9%
B. 11.1%
C. 11.5%
D. 11.9%
In determining the appropriate listing contract to be used, it is important to know
whether a multiple listing service (MLS) will be employed. The MLS only accepts
which of the following types of listing contracts?
A. Open listing
B. FSBO listing
C. Exclusive agency listing
D. Exclusive right of sale listing
The most flexible method of land description, capable of describing even the most
irregular of parcels, can be described as a very precise, compass-directed walk around
the boundary of a parcel. This method is commonly referred to as:
A. metes and bounds
B. subdivision plat lot and block number
C. government rectangular survey
D. tax parcel number
In commercial leases, rents do not necessarily have to be kept constant over the life of
the lease term. One option is for there to be pre-specified increases in the contract rental
rate over time, sometimes referred to as ‘step-ups” or “escalations.” This type of rent
treatment is commonly referred to as:
A. flat rent
B. graduated rent
C. indexed rent
D. percentage rent
Suppose you are interested in taking a mortgage loan for $250,000 in order to purchase
your principal residence. Your lender has suggested that you might be interested in
taking an FHA loan. In order to do so, you must pay an additional up-front mortgage
insurance
premium (UFMIP) of 1.0% of the mortgage balance. If the interest rate on the
fully-amortizing mortgage loan is 5% and the term is 30 years, what is your monthly
mortgage payment assuming the UFMIP is financed?
A. $1,342.05
B. $1,355.47
C. $1,498.88
D. $2,500
In analyzing a borrower’s credit worthiness, the lender will typically examine the
borrower’s FICO score (a product developed by the Fair Isaac Corporation). High
quality (prime) borrowers are those with a credit score above:
A. 350
B. 620
C. 660
D. 850
While the principal parties to a transaction must be legally competent for a contract to
be valid, it is possible for a party acting on behalf of a principal to obtain this legal
right. In order for personal representatives and trustees to be authorized to act on behalf
of a principal, a legal instrument commonly referred to as ____________ must be in
place.
A. assignment
B. power of attorney
C. mutual assent
D. consideration
One of the main criticisms of property taxes is that the property tax of lower income
households is higher than that of higher income households, as a percentage of their
respective incomes. In other words, taxes are criticized for being:
A. regressive
B. comprehensive
C. concurrent
D. extraterritorial
Given the following information, calculate the effective gross income. Property: 4
office units, Contract rents per unit: $2500 per month, Vacancy and collection losses:
15%, Operating Expenses: $42,000, Capital Expenditures: 10%
A. $100,000
B. $102,000
C. $120,000
D. $135,000
Given the following information, calculate the loan-to-value ratio for this property.
Loan amount: $450,000, Interest rate: 7.5%, Acquisition price: $550,000
A. 0.18
B. 0.82
C. 0.99
D. 1.22
Which of the following covenants in a deed promises that the property will not be
claimed by someone with a better claim to title?
A. Covenant of seizin
B. Covenant against encumbrances
C. Covenant of quiet enjoyment
D. Exceptions and reservation clause
Critical to any listing contract is the question of when the broker becomes entitled to a
commission. Traditionally, the broker is still entitled to a commission in all of the
following scenarios EXCEPT:
A. If the seller refuses to sell upon being presented with an offer meeting the original
terms and conditions
B. If the seller cannot deliver the property for any reason due to his or her fault.
C. If both the buyer and seller sign a contract but then agree to cancel it.
D. If a contract is contingent upon the buyer obtaining financing and the buyer is unable
to do so.
In collecting data for nonresidential property analysis, it is helpful to understand the
business community that currently exists in the specific area in question. A preliminary
approach for ascertaining the number of firms by size, industry, and location is to obtain
data from:
A. the Bureau of Labor Statistics
B. the National Transportation Service
C. the U.S. Bureau of the Census: County Business Patterns
D. the Federal Reserve
The purchase price of an income producing property today is $570,000. After analysis
of the expected future cash flows, expected sales price, and expected yield, the investor
determines that the future cash flows have a present value (PV) of $580,000. Taking
into consideration the price of the property today, what is the net present value (NPV)
of this investment opportunity, and should the investor take the deal?
A. $10,000; Yes
B. $10,000; No
C. -$10,000; Yes
D. -$10,000; No
Given the following information, calculate the before-tax equity reversion (BTER).
NOI: $89,100, Annual Debt Service: $58,444, Net Sale Proceeds: $974,700, Remaining
Mortgage Balance: $631,026.
A. $30,656
B. $343,674
C. $572,582
D. $885,600
To overcome the potential shortcomings of single-year decision making metrics, many
investors in real estate also perform multiyear discounted cash flow (DCF) valuation.
DCF valuation differs from the single-year ratio analysis in all of the following ways
EXCEPT:
A. Only with DCF must the investor estimate an appropriate investment horizon
accounting for how long she will hold the property.
B. Only with DCF must the investor select the appropriate yield at which to discount all
expected future cash flows.
C. Only with DCF must the investor make explicit forecasts of the property’s net
operating income for each year in the expected holding period.
D. Only with DCF must the investor use a defensible cash flow estimates that
incorporates appropriate measures of income and expenses.
It is common for real estate firms to identify submarkets, such as property types or
particular sections of a city, in which they can specialize and concentrate their
transaction activity. This practice is referred to as:
A. internet marketing
B. open listing
C. discount brokerage
D. market segmentation
While balloon mortgage loan payments are typically based on a 30-year amortization
schedule, the loan actually matures in either 3, 5, 7, or 10 years. Of the following,
which is the primary risk that a lender reduces their exposure to through the relatively
short loan term on a balloon mortgage?
A. Default risk
B. Interest rate risk
C. Liquidity risk
D. Financial risk