REAL 4000 Test 3

Assume you have taken out a partially amortizing loan for $325,000 that has a term of 7 years, but amortizes over 30 years. Calculate the balloon payment at maturity (Year 7) if the annual interest rate on this loan is 4.5%. Question options: $1,646.73 $118,468.21 $282,835.42 $324,572.02

$282,835.42

Suppose that an income-producing property is expected to be purchased at a 15% overall cap rate, and expected to yield cash flows for the owner of $150,000 in each of the next five years, with cash flows being received at the end of each period. If the opportunity cost of investment (discount rate) is 7.00% annually and the property can be sold for $1,250,000 at the end of the fifth year, determine the value of the property today using the DCF approach. Question options: $1,506,262 $1,449,636 $1,477,581 $1,344,770 $1,395,862 $1,369,991 $1,000,000 $1,422,403

$1,506,262

Assume the following for a floor in a multistory office building with a total usable area of 20,000 sq ft; a total common area of 5,000 sq ft; a total rentable area of 25,000 sq ft; and a tenant called "Highwoods Inc." that has a usable area: 4,000 sq ft and an annual flat rental rate of $25 per sq ft. How much total rent does Highwoods Inc pay per year at this property? 1,200,000 $220,000 $200,000 $250,000 $125,000 $120,000 $100,000

$125,000

Using the following information, determine the net operating income (NOI) for the first year of operations of the subject property using "above-line" treatment of capital expenditures. Subject Property:Number of apartments 15Market rent (per month) 1000Vacancy and collection losses 10% of PGIOperating expenses 5% of EGICapital expenditures 10% of EGI $137,700 $135,000 $153,900 $162,000

$137,700

Suppose you are thinking about purchasing a small office building for $1,500,000. The 30 year fixed rate mortgage that you have arranged covers 80% of the purchase price and has an interest rate of 8%. Assume you were to default and go into foreclosure in year 10 of this loan. If the lender was able to sell this property for $700,000, how much does the lender stand to lose in the absence of PMI? Question options: $0 $92,696 $260,000 $352,696

$352,696

Suppose you are looking to finance a property with a projected Year 1 NOI of $54,450 and a going-in (overall) cap rate of 7.00% that is used to determine value. The lender tells you that the maximum loan size will be the lesser of an 80% Loan-to-Value (LTV) or a 1.25 Debt Coverage Ratio (DCR). The other loan terms are as follows: amortization period of 30 years, annual interest rate of 6%, and monthly payments. What is the most this lender will lend you, given these restrictions? Question options: $777,857 $622,286 $619,416 $605,454 $43,560 $711,232 $534,092 $612,300 $687,209 $598,398

$605,454

Suppose that you are attempting to value an income-producing property using the direct capitalization approach. Using data from comparable properties, you have determined the overall capitalization rate to be 7.0%, a reasonable discount rate of 9%, and an exit cap rate of 12%. If the projected first-year net operating income (NOI) for the subject property is $135,500, If the projected second-year net operating income (NOI) for the subject property is $145,500, and the projected final-year total cash flow for the subject property is $1,155,500 what is the indicated value of the subject using direct capitalization? Enter the answer below as an absolute value (a positive number), no dollar sign. Rounding to the nearest whole number (no decimal places) is ok.

1,935,714

*Note, these are the same assumptions as the previous question* Assume the following for a floor in a multistory office building with a total usable area of 20,000 sq ft; a total common area of 5,000 sq ft; a total rentable area of 25,000 sq ft; and a tenant called "Highwoods Inc." that has a usable area: 4,000 sq ft and an annual flat rental rate of $25 per sq ft. What is the load factor for this property? 1.15 1.20 1.25 1.30 1.35 1.75 1.80

1.25

Given the following information, calculate the debt coverage ratio for this investment: potential gross income: $120,000; vacancy rate: 9%; net operating income: $60,000; operating expenses: $51,300; acquisition Price: $520,000; debt service: $40,000. 4.23 1.50 1.45 0.67 8.29

1.50

Suppose that examination of a pro forma reveals that the fifth-year net operating income (NOI) for an income-producing property that you are analyzing is forecasted to be $913,058 (you can assume that this cash flow occurs at the end of the year). If you estimate the projected NOI growth rate for the property to be 10% per year, determine the projected gross sales price (sales price) of the property at the end of year 5 if the going-out capitalization rate is 9.5%. Enter the answer below as an absolute value (a positive number), and without dollar sign. Rounding to the nearest whole number (no decimal places) is ok.

10,572,251

Given the following information, calculate the equity dividend rate for this investment: first-year NOI: $18,750; before-tax cash flow: $11,440; acquisition price: $570,000; total equity portion of investment: 20% of acquisition price. Question options:11.0% 7.94 9.23% 10.04% 13.62% 8.54% 12.17%

10.04%

Given the following information, calculate the going-in capitalization rate for the specific property: first-year NOI: $19,000; acquisition price: $155,000; equity investment: 20% 12.50% 62.57% 15.66% 12.26%

12.26%

Given the following information, calculate the cash down payment (equity) required to purchase the specific property: purchase price: $500,000; loan amount: 75% of purchase price; up-front financing costs: 2.5% of loan amount.

134,375.00

Consider the table of projected NOI cash flows for a commercial real estate asset below. Year 1 Year 2 Year 3 Year 4 Year 5 $ 150,000 $ 157,500 $ 165,375 $ 173,644 $ 182,326 If the building is sold at the end of Year 3 at a 7.25% going-out cap rate, and 4.50% in selling expenses are incurred, what is the total cash flow (TCF) in year 3? Enter the answer below as an absolute value (a positive number), no dollar sign. Rounding to the nearest whole number (no decimal places) is ok.

2,452,686

If a lender has agreed to offer you a loan with a loan-to-value ratio of 65%, what is the maximum projected size of the loan if your property's projected next year of NOI is $230,000 and an overall cap rate of 5.6% is used to find value?

2,669,643

Suppose your property produces an annual NOI of $50,000. You are looking at taking a mortgage loan with a 10-year term that is amortized over 30 years at a 6% interest rate. Payments would be due monthly. What is the maximum loan amount you can take if the lender requires a minimum DCR of 1.25? Make sure to round down so not to exceed the maximum loan amount. No dollar signs, and only use an absolute value (only positive number) as an answer.

555,972

Given the following information, calculate the debt yield ratio on the following commercial property: estimated net operating income in the first year: $210,000; loan amount: $2,800,000; purchase price: $3,700,000. Question options: 7.5% 23.0% 75.7% 5.7%

7.5%

BTCF is an unlevered cash flow, while NOI is a levered cash flow. True False

False

The starting point in calculating net operating income is the total annual income the property would produce assuming 100% occupancy and no collection losses is called Effective Gross Income (EGI) True False

False

The use of a mezzanine loan in the purchase of a commercial property decreases the borrower's expected first year return on equity, allows the borrower to decrease their financial leverage in the purchase of the property, mitigates the risk of financing for the borrower, and requires the borrower to mortgage the property as collateral for the loan rather than pledging the equity in the single asset entity that owns the property. Question options: True False

False

One complication that appraisers may face is the variety of lease types that may be available for a particular property type. Which of the following statements best describes a graduated or step-up lease? Rental rate increases are indexed to the general rate of inflation The lease establishes a schedule of rental rate increases over the term of the lease. The monthly rent remains fixed over the entire lease term. Rental rates are a function of the sales of the tenant's business.

The lease establishes a schedule of rental rate increases over the term of the lease.

In making single-asset real estate investment decisions, the first pass often involves calculating a series of returns, ratios, and multipliers. Which of the following is often cited as a limitation associated with this type of analysis? They are difficult to calculate. They fail to incorporate cash flows beyond the first year of the analysis. They are rarely used by industry professionals. They are complex to understand.

They fail to incorporate cash flows beyond the first year of the analysis.

NOI is considered the fundamental determinant of market value for income-producing properties True False

True

Assume you take a first and second loan on a commercial property; both are interest-only loans with one financing 60% of the purchase price at a 5% interest rate, and the other financing 20% of the purchase price at a 15% interest rate. Positive leverage would be created in the first year if the property was purchased with expected returns equivalent to ________________ Question options: anything under a 5% going-in cap rate (unlevered IRR) anything over a 5% going-in cap rate (unlevered IRR) anything under a 6% going-in cap rate (unlevered IRR) anything over a 6% going-in cap rate (unlevered IRR) anything under a 15% going-in cap rate (unlevered IRR) anything over a 15% going-in cap rate (unlevered IRR) anything under a 20% going-in cap rate (unlevered IRR) anything over a 20% going-in cap rate (unlevered IRR)

anything over a 6% going-in cap rate (unlevered IRR)