REAL AND ITS STATE CH 1

If we desire to classify land by its use, land that does not include any improvements to the land would be categorized as:

"raw" land.

Participants in the capital markets can be divided into four main categories: private equity, public equity, private debt, and public debt. A limited liability corporation's ownership of real property occurs in the:

A) Private equity market

20) An example of a real estate asset that trades in the private debt market is a(n):

B) commercial mortgage.

1. A market where tenants negotiate rent and other terms with property owners or their managers is referred to as a(n):

User/Space market

1. Of the following asset categories, which class has the greatest aggregate market value?

a. Corporate equities and mutual funds

1. What portion of households owns their house?

b. Approximately two-thirds

1. The actions of local, state, and federal governments affect real estate values.

d. Through all of the above

Each commercial property has unique features, whether it is its age, the building design of its structures, occupancy or its location. As such, real estate markets consist of assets that are considered:

heterogeneous

8) Which of the following would be considered a tangible asset?

land

Real estate is property, which can be either a tangible or an intangible asset. Which of the following would be considered an intangible asset?

mortgage

The term real estate is used in three fundamental ways. When real estate is defined as the land and its improvements, it is being viewed as purely a(n):

tangible asset

Real estate consists of the physical structures and infrastructure that accompany the land. All of the following are examples of an improvement to the land EXCEPT:

the building and parking lot.

Real estate is defined as land and its permanent improvements. Which of the following is an example of an improvement to the land?

water and sewer systems

Based on your understanding of the supply and demand dynamics of user/space markets, the new construction of units would, all else equal, cause which of the following effects?

A) decrease equilibrium rental rates and decrease property value

A primary determinant of the feasibility of new construction is the relationship between the current level of market value and the cost of new construction. We would expect the supply of properties to

A) increase if current market values are greater than the cost of construction.

Primarily through land use controls and property tax policy, which of the following branches of government has the largest influence on real estate values?

A) local government

Capital markets can be divided into four main categories: private equity, public equity, private debt, and public debt. An example of a real estate asset that trades in the private equity market is a(n):

A) real property.

Capital markets can be divided into two broad categories: equity interests and debt interests. Equity investors in real estate expect to earn a return on their investment through:

A) the collection of rent and selling or refinancing the asset.

Competition for the currently available supply of locations and space coupled with the existing supply of leasable space, determines:

A) the current level of rental rates for each submarket and property.

1. Which of the following is not important to the location of commercial properties?

Access to schools

28) The required rate of return that an individual or company expects from a real estate investment is determined in the:

B) capital market for both debt and equity.

Considered a fundamental pricing metric in commercial real estate markets, the ratio of a property's annual net operating income to its market value is more commonly referred to as a(n):

B) capitalization rate.

The expected stream of rental income is capitalized into value by converting expected future cash flows into present value through a process called:

B) discounted cash flow analysis.

27) The national government can have a significant impact on the value of real estate through:

B) income tax policy.

The investment grade property market is typically targeted by all the following groups of investors EXCEPT:

B) individual investors.

Helping to constrain entry into real estate related occupations, which of the following branches of government is directly involved in establishing rules and regulations for the licensing of professionals in the field of real estate?

B) state government

Participants in the capital markets can be divided into four main categories: private equity, public equity, private debt, and public debt. Bank lending as a source of financing for the acquisition of real property occurs in the:

C) Private debt market

19) An example of a real estate asset that trades in the public equity market is a(n):

C) equity REIT.

Especially in terms of retail properties, which of the following attributes is considered the most likely to result in drastic value differences between otherwise similar properties?

C) location attributes

1. The market in which required rates of return on available investment opportunities are primarily determined is referred to as the:

Capital market

18) An example of a real estate asset that trades in the public debt market is a(n):

D) commercial mortgage-backed security (CMBS).

Investors in real estate can choose to hold properties directly in the private market or indirectly through publicly traded real estate securities. The market for buying, selling, and leasing real estate can be characterized by all of the following EXCEPT:

D) low transaction costs.

When viewed as a tangible asset, real estate can be defined as the land and its permanent improvements. Improvements on the land include:

Fences

1. Real estate markets differ from other asset classes by having all of the following characteristics except:

Homogeneous product

1. Among the following four categories, which is the largest asset category in the portfolio of a typical U.S. household?

Housing

1. Which of the following attributes of a home are the most difficult to observe and value?

Location attributes

Commercial real estate assets are markedly different from assets in other financial markets due to their heterogeneity, immobility, localized nature, illiquidity, and market segmentation. Based on your understanding of these characteristics, which of the following statements best describes what is meant by highly segmented markets?

Properties can be grouped based on classifications such as property type, location, investor type or price.

4) All of the following are examples of an improvement on the land EXCEPT:

Streets

1. Storm water drainage systems are best described as:

b. Improvements to the land

Real estate values derive from the interaction of three different sectors in the economy. Which of the following sectors serves to allocate financial resources among households and firms requiring funds?

capital market

Based on your understanding of the supply and demand dynamics of user/space markets, an increase in demand for leasable space would, all else equal, cause which of the following effects?

increase equilibrium rental rates and increase property value

The term real estate is used in three fundamental ways. When real estate is defined as a bundle of rights associated with ownership and the use of the site and improvements, it is being viewed as purely a(n):

intangible asset.

According to the Department of Agriculture, which of the following land types constitutes the lowest percentage of land use in the United States?

urban land

If we desire to classify land by its use, land that consists of residential, industrial, commercial, and institutional land uses would be classified as:

urban land.

The demand for real estate derives from the need that market participants (e.g., owner occupants, tenants, renters) have for shelter and convenient access to other locations. This competition for physical location and space occurs in the:

user market.