Ch 16 practice ques reu
Investment properties
A 1031 exchanges applies to what types of property...? Cooperative apartments Secondary residences Personal residences Investment properties
Class B
A Fortune 500 company looking to lease space for its corporate headquarters will most likely look for this Class of office building...? Class A Class B Class C Class D
Taxable Basis
A building's Net Operating Income - Total Deductions is equal to what...? Gross Potential Income Total Expenses Taxable Basis Effective Net Income
Estoppel letter
A letter provided by the tenant to the landlord, which assures that their lease is binding, accurate, and being paid upon, is known as what...? Attornment letter Guarantee letter Estoppel letter Lease letter
3-15 stories
A mid-rise office building consists of how many stories...? 10 stories only 1-3 stories 3-15 stories More than 20 stories
Capital expenditure
A non-recurring expense is considered what...? Capital expenditure General repair General maintenance Upkeep
Cash on Cash Return
A percentage return on money invested in a property by an investor is referred to as...? Rate of Return Profit Cash on Cash Return Internal Rate of Return
Rate of Return
A profit on an investment over a period of time, expressed as a proportion of the original investment is also known as...? Time Value of Money Internal Rate of Return Rate of Return Pro-forma
Due diligence
A thorough review of a commercial investment property's financials are conducted during this process...? Zoning review Due diligence Property inspection Closing
Income producing properties
According to the IRS, which of the following property types is NOT considered a permitted deduction on one's tax return...? Time share Income producing properties Vacant land Primary residence
Pro-forma Statement
An accounting statement that forecasts income and expenses for a period of time, typically five or more years is known as what...? Net Income Statement Pro-forma Statement Gross Income Statement Projected Statement
Taxpayer Relief Act of 1997
As a result of this Act, the top capital gains rate fell from 28% to 20%...? Homestead Act Taxpayer Relief Act of 1997 Taxpayer Relief Act of 1982 Fair Housing Act of 1988
Longer
As compared to a residential building, finding a new tenant for a commercial building often takes...? Longer Significantly shorter Equal amount of time Shorter
5 units or more
At what size does a bank treat a residential building as commercial...? 3 units or more 2 units or more 5 units or more 4 units or more
Class B
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 A Class B Class C Class D
Both property types are valued the same way
How is a multi-family property valued different than an office building...? Multi-family buildings are worth more money Office buildings are valued based on comparable sales while multi-family buildings use the income approach Both property types are valued the same way Office buildings are worth more money
The new tenant
If a tenant assigns their lease to a new tenant, who is responsible for maintaining the lease...? The original tenant The new tenant All of the above The landlord
Liquid
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...? Speculative Opportunistic Liquid Illiquid
Triple Net Lease
In this lease type, the tenant is responsible for paying all of the building expenses...? Gross Lease Triple Net Lease Double Net Lease Net Lease
Preferred Return
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...? Liquidity Leverage Exclusive Return Preferred Return
Gross Potential Income
Jerry is looking to buy a multi-family building. He would like to know much rent can be collected if the building were 100% occupied. Which line of the pro-forma should Jerry look to find this information...? Gross Potential Income Net Operating Income Total Income Effective Gross Income
Liquid
Mark recently purchased a commercial investment property. Even after paying a significant down payment, he still has enough cash to fund the operations of the property until the cash flow is sufficient. Mark may be considered what...? Passive investor Illiquid Liquid Opportunistic
Capital gains
Operations income does NOT include which of the following...? Portfolio income Active income Capital gains Passive income
The value of the properties are the same
Property A is a self storage facility with a going cap rate of 6.0%. Property B is an office building with a going cap rate of 6.0%. If both properties produce the same NOI, which property is worth more...? Property B Property A The value of different asset classes cannot be compared The value of the properties are the same
Non-investment properties
Property taxes on these types of properties can only be deducted if one's taxes are itemized...? Commercial properties Investment properties Income producing properties Non-investment properties
8,000 - 30,000 sq.ft.
Retail strip centers typically consist of how many square feet...? 300,000 - 1,000,000 sq.ft. 8,000 - 30,000 sq.ft. 100,000 - 300,000 sq.ft. 30,000 - 100,000 sq.ft.
Less than 1 year
Short-term capital gains applies to assets owned for this time period...? Less than 5 years Less than 4 years Less than 1 year Less than 2 years
All of the above
Since real estate is an illiquid investment, an owner cannot easily do what...? Invest in another property All of the above Withdraw his equity Sell his property
Mortgage interest
The IRS allows homeowners to deduct this from their tax returns...? Mortgage payments Mortgage principal Mortgage interest Mortgage interest and principal
Using all cash
The capitalization rate is equal to the annual return an investor will achieve if the property were purchased how...? Using 100% financing Using all cash Using leverage Using Seller financing
Cap Rate = Income / Value
The capitalization rate of a property can be determined by which of the following formulas...? Cap Rate = Income x value Cap Rate = Value / Income Cap Rate = Income + Value Cap Rate = Income / Value
Value of house - land value = Depreciable basis
The depreciable basis for a single family residence is calculated using the following formula...? Asking price - land value = Depreciable basis Land value - value of house = Depreciable basis Income - land value = Depreciable basis Value of house - land value = Depreciable basis
Net Sales Price - Adjusted Basis
The formula for determining realized gains is equal to...? Adjusted Basis - Net Sales Price Adjusted Basis - Income Income - Adjusted Basis Net Sales Price - Adjusted Basis
Capital Expenditures
The net operating income of a property does NOT include which of the following expenses...? Management Fees Real Estate Taxes Repairs and Maintenance Capital Expenditures
Capital expenditure
The replacement of a roof in a commercial building may be considered what type of expense...? Capital expenditure General repairs General maintenance Contract services
Gross Income
The total amount collected from rents and other income producing opportunities is referred to as...? After Tax Cash Flow Gross Income Net Operating Income Before Tax Cash Flow
Residential
These types of properties typically do NOT provide a strong return on an investor's money...? Retail Commercial Office Residential
Tax Reform Act of 1986
This Act raised the bottom tax rate from 11% to 15%...? Tax Reform Act of 1986 Taxpayer Relief Act of 1997 Fair Housing Act of 1968 Tax Reform Act of 1997
Rent roll
This document will show what units in a particular building are vacant and which units are occupied...? Rent roll Certificate of Occupancy Lease Deed
Mixed-use buildings
This property type is NOT considered a primary commercial property type...? Mixed-use buildings Apartment buildings Office buildings Shopping centers
Neighborhood Centers
This retail property type is typically 30,000 - 100,000 sq.ft...? Neighborhood Centers Strip Centers Outlet Centers Mega Malls
Outlet Centers
This retail property type typically consists of 1 - 2 anchor tenants...? Outlet Centers Strip Centers Regional Malls Neighborhood Centers
121
This section of the Internal Revenue Code (IRC) allows for an exclusion on capital gains tax at the sale of a primary residence...? 121 161 1031 150
Operation income
This type of income is realized by the owner during the year-to-year operations of the property...? Operation income Residual income Market income Capital gains
Net lease
This type of lease is typically found in office buildings...? Net lease Proprietary lease Leasehold Temporary lease
$10,000 (Dollars)
Under the Taxpayer Relief Act of 1997, a buyer can use up to how much of their IRA fund towards a down payment, without being subject to an early withdrawal penalty...? $10,000 (Dollars) $250,000 (Dollars) $20,000 (Dollars) $500,000 (Dollars)
Capital reserves
What do lenders typically have a buyer place in an escrow account...? Down payment Interest payments Insurance payments Capital reserves
Stability of cash flow
What is a primary focus of a commercial property owner, as opposed to a residential owner...? Aesthetics of the building Desirability of the building Stability of cash flow Interior finishes of the building
Ceiling heights
What is an important aspect of industrial warehouse space...? Exterior wall construction Gross square footage Floor slab construction Ceiling heights
Tax deduction
When depreciation is subtracted from net income to determine a property's taxable income, the depreciation is considered a...? Tax deduction Tax rebate Tax credit Tax savings
When evaluating a potential property to buy
When is a pro-forma conducted by a real estate investor...? When trying to determine how to reduce expenses When evaluating a potential property to buy When reviewing the previous year's financials from his/her building When selling a building
Desirability
Which of the following is NOT a characteristic of commercial investment properties...? Risk Desirability Liquidity Leverage
Using all cash
Which of the following is NOT an example of using leverage in a deal...? Using all cash Obtaining seller financing Syndicating capital Obtaining a mortgage
Personal use assets
Which of the following is NOT considered a depreciable asset...? Personal use assets Shopping center Single family residence Multi-family building
Net proceeds from sale of property
Which of the following is NOT considered operations income...? Passive income Net proceeds from sale of property Active Income Portfolio income
Liquidity
Which of the following is a major aspect of commercial investment properties...? Emotions Desirability Liquidity Aesthetics
Interest paid on a mortgage
Which of the following is an example of a 'Deduction for Taxes'...? Interest paid on a mortgage Repairs and Maintenance Capital Expenditures Real Estate Taxes
Installing a new roof on a building
Which of the following is an example of a capital improvement...? Installing a new roof on a building Installing new carpeting in the lobby Repainting the corridors Window repairs
Syndicating capital
Which of the following is an example of using 'other people's money'...? Syndicating capital Buying all cash Leasing the property Signing a lease with an option to buy
Obtaining a mortgage
Which of the following is an example of using leverage in a real estate transaction...? Obtaining a mortgage Conducting due diligence Inspecting the property Using all cash to purchase the property
Apartment buildings
Which of the following is considered a main commercial property type...? Apartment buildings Self storage facilities Vacant land Mixed-use buildings
Office buildings
Which of the following is considered a main commercial property type...? Office buildings Self storage facilities Vacant land Mixed-use buildings
Triple Net Lease
Which of the following lease types typically results in the lowest rent per square foot...? Double Net Lease Triple Net Lease Net Lease Gross Lease
Double Net Lease
XYZ Company recently signed a lease on their new office space. As part of the lease agreement, they must pay for property's real estate taxes and premiums for insuring the building. What type of lease did XYZ Company sign...? Net Lease Triple Net Lease Double Net Lease Gross Lease
