Real Estate Exam Chapter 15a
A low-rise office building consists of how many stories...?
1-3 stories
What is the cash-on-cash return for an owner who purchases a $5,000,000 property, with an NOI of $500,000 using all cash...?
10 (Percent %)
Retail outlet centers typically consist of how many square feet...?
100,000 - 300,000 sq.ft.
Abby purchased a commercial property using all cash at a 11% capitalization rate. What is Abby's cash-on-cash return on the deal...?
11 (Percent %)
If the capitalization rate on a property is 12%, and the buyer purchases the property using all cash, what is the cash-on-cash return for the buyer...?
12 (Percent %)
Mega malls consist of how many anchor tenants...?
3 or more
A commercial apartment building consists of how many units...?
5 or more units
If the capitalization rate of a property is 7%, and an investor purchases the property using all cash, what is the cash-on-cash return for the investor...?
7 (Percent %)
What is the cash-on-cash return for an owner who purchases a $1,200,000 property, with an NOI of $90,000 using all cash...?
7.5 (Percent %)
Retail strip centers typically consist of how many square feet...?
8,000 - 30,000 sq.ft.
Anthony bought a commercial property using all cash at a 8.5% capitalization rate. What is Anthony's cash-on-cash return for the deal, after year 1...?
8.5 (Percent %)
What is the cash-on-cash return for an owner who purchases a $8,250,000 property, with an NOI of $750,000 using all cash...?
9.1 (Percent %)
Which of the following is NOT a primary characteristic of real property investments...?
Aesthetics
Which of the following is an example of using leverage in a real estate transaction...?
All of the above
Which of the following is considered a major commercial property type...?
All of the above
Walmart serves as the primary tenant in a large shopping center. Walmart can also be referred to as what...?
Anchor tenant
Which of the following is considered a main commercial property type...?
Apartment buildings
How is a multi-family property valued different than an office building...?
Both property types are valued the same way
Brian would like to buy a larger commercial building. How can this be accomplished using less cash out of pocket by Brian...?
Brian should use leverage by obtaining seller financing
What is the formula for determining cash on cash return...?
Cash Flow / Down Payment
A residential property owner, as opposed to a commercial owner, is typically NOT concerned with what...?
Cash flow of the property
What is an important aspect of industrial warehouse space...?
Ceiling heights
David works in a newly built, high-rise office building. David most likely works in what Class of building...?
Class A
Eric works in a 20 year-old building that lacks some of the amenities found in newer office buildings. Eric most likely works in this Class of building...?
Class B
If a residential building consists of 5 dwelling units, what will the building be considered...?
Commercial
The amount of cash flow a property produces is used to determine the value of this property type...?
Commercial
The value of this property type is based primarily on an investor's return on their money...?
Commercial
The annual amount to be paid by a debtor on an obligation to repay borrowed money is known as what...?
Debt Service
Which of the following is NOT a characteristic of commercial investment properties...?
Desirability
A thorough review of a commercial investment property's financials are conducted during this process...?
Due diligence
Which of the following may NOT be considered a main characteristic of commercial investment properties...?
Emotions
GAAP is an acronym for what...?
Generally Accepted Accounting Principles
James purchased a commercial property at a 7.5% cap rate. The previous owner agreed to finance the deal at 8%. Why may James elect not to go ahead with the financing...?
He will experience negative leverage
If an owner spends all of his/her cash on a down payment of an investment property, and does not have any additional cash during the operations of the property, he/she is considered what...?
Illiquid
Net operating income is equal to what...?
Income � Expenses
Which of the following is considered a primary commercial property type...?
Industrial properties
What is the equation for negative leverage...?
Interest Rate > Cap Rate
Which of the following will yield negative leverage in a deal...?
Interest Rate > Cap Rate
Real estate is considered an illiquid asset because....?
It cannot easily be sold
Larry purchased a property at a 6% Cap Rate. What must the interest rate on his mortgage be in order to avoid negative leverage...?
Less than 6%
David bought a building at a 7% cap rate. What will the interest rate on his mortgage have to be in order to experience positive leverage...?
Less than 7%
Adam is a commercial real estate investor. He almost always uses 'other people's money' to fund his deals. In doing so, Adam is using what...?
Leverage
Ely recently purchased a commercial investment property using a jumbo loan from the bank. Ely's use of bank financing is an example of what...?
Leverage
Howard wants to buy a commercial building but does not have enough cash. He decides to bring in partners to help fund the equity and provide them with a return on their money. Howard's decision to use partners is an example of what...?
Leverage
Obtaining seller financing to help fund the purchase of a commercial investment property is an example of using what....?
Leverage
Syndicating capital from friends and family to purchase a commercial investment property is an example of using what...?
Leverage
Using a mortgage to buy real estate is also known as what...?
Leverage
What is used by nearly every real estate investor to buy a commercial property...?
Leverage
Which of the following is a primary aspect of commercial investment properties...?
Leverage
Which of the following will allow an owner to buy a larger building, using the same amount of cash...?
Leverage
If an owner has enough cash to fund the operations of a commercial investment property while the cash flow becomes stabilized, he is considered this...?
Liquid
If the cash flow of a building cannot cover the cost of upkeep, the owner must have what, to maintain the building...?
Liquidity
What is needed of a commercial real estate owner when investing in a property...?
Liquidity
Lisa would like to buy a larger self storage building. How can this be accomplished using less cash out of pocket by Lisa...?
Lisa should use leverage by obtaining seller financing
This type of office building consists of 1-3 stories...?
Low-rise office building
This type of property includes retail space on the ground floor with residential units above...?
Mixed-use
This property type is NOT considered a primary commercial property type...?
Mixed-use buildings
A high-rise office building consists of how many stories...?
More than 20 stories
If the cap rate on a building is 4% and the interest rate on the mortgage is 5.5%, what will the owner experience...?
Negative Leverage
William buys a building in which the Interest Rate on his mortgage is greater than the Cap Rate of the building. What will William experience with the deal...?
Negative Leverage
This retail property type is typically 30,000 - 100,000 sq.ft...?
Neighborhood Centers
This is equal to the gross income minus expenses (and sometimes debt service)...?
Net Operating Income
This type of lease is typically found in office buildings...?
Net lease
This retail property type typically consists of 1 - 2 anchor tenants...?
Outlet Centers
If the cap rate on a building is 7% and the interest rate on the mortgage is 5%, what will the owner experience...?
Positive Leverage
James created a real estate syndication to purchase a multi-family building. He offered to pay his investors an 8% return first, after which he will split the remaining profits 50/50. What is the 8% return referred to...?
Preferred Return
What will leverage allow an investor to do...?
Purchase a larger building
A profit on an investment over a period of time, expressed as a proportion of the original investment is also known as...?
Rate of Return
Usable area that can be leased/rented to a tenant is known as...?
Rentable Square Footage
These types of properties are typically bought using emotions...?
Residential
The value of commercial real estate is based, in part, on which of the following...?
Return on Investment
Which of the following is a primary characteristic of real property investments...?
Risk
Which of the following is NOT considered a main commercial property type...?
Self storage buildings
Which of the following is considered a primary commercial property type...?
Shopping centers
As a commercial real estate owner, what should be your primary focus...?
The risk involved in the deal
Due diligence is critical to understanding what of a commercial investment property...?
The true value of the property
The idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity is known as...?
Time Value of Money
The concept that $1 dollar today is worth more than $1 in the future is known as what...?
Time value of money
When does an owner have positive leverage in a deal...?
When the Cap Rate is greater than the Interest Rate
When will an owner experience positive leverage in a deal...?
When the Cap Rate is greater than the Interest Rate on the mortgage
When will an owner experience a higher cash-on-cash return on his investment as compared to an all cash deal...?
When there is Positive Leverage in the deal
According to the 'Time value of money' concept, $1 today is worth what, as compared to $1 in the future...?
Worth more