Real Estate U Ch.16 Q&A

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 %

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%

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%

at what size does a bank treat a residential building as commercial...?

5 units or more

Michael buys a property using all cash at a 6% capitalization rate. What is Michael's cash-on-cash return on the deal...?

6%

93. The due diligence process on a commercial investment property begins with this...?

A review of the property's financial numbers

waltmart serves as the primary tenant in a large shopping center. Waltmart can also be referred to as what...?

Anchor Tenant

99. Which of the following is NOT an example of using leverage in a real estate transaction...?

Buying a property using all cash

Which of the following is critical to understanding the true value of a commercial investment property...?

Due Diligence

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

Eli is a real estate syndicator. He pools together a group of investors to buy commercial investment properties. Eli's use of other people's money is an example of what>>>?

Leverage

Syndicating capital from friends and family to purchase a commercial investment property is an example of using what...?

Leverage

Which of the following will allow an owner to buy a larger building, using the same amount of cash...?

Leverage

Cash, in addition to the down payment, that an owner needs to run and maintain an investment property is known as this

Liquidity

Mark would like to buy a larger office building. How can this be accomplished using less cash out of pocket by Mark...?

Mark should use leverage by syndicating capital

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

Which of the following is an example of using leverage in a real estate transaction...?

Obtaining a mortgage Creating a real estate syndication Obtaining seller financing

This retail property type typically consists of 1 - 2 anchor tenants...?

Outlet Centers

Phillip would like to buy a larger multi-family building. How can this be accomplished using less cash out of pocket by Phillip...?

Phillip should use leverage by obtaining a mortgage

An accounting statement that forecasts income and expenses for a period of time, typically five or more years is known as what...?

Pro-forma Statement

89. These types of properties typically do NOT provide a strong return on an investor's money...?

Residential

Which of the following is NOT considered a main commercial property type...?

Self storage Buildings

When conducting their due diligence on a commercial property, how can an investor verify the market rents for a particular use...?

Speak with a broker who specializes in that use Review recently signed leases for that use Research the asking rents of competing properties

Justin decided to purchase a property using all-cash. What can Justin do to increase his return on investment...?

Utilize positive leverage

When does an owner have negative leverage in a deal...?

When the interest rate on the mortgage is greater than the cap rate on the building

When will an owner experience a lower cash-on-cash return on his investment as compared to an all cash deal...?

When there is Negative Leverage in the deal

how is a multi-family property valued different than an office building...?

both property types are valued the same way

the % which is the sum of the discount rate, the effective tax rate and the recapture rate representing the relationship between net operating income and present value isknown as

capitalization Rate

A % return on money invested in a property by an investor is referred to as....?

cash on cash return

A newly built office building is considered this Class of building...?

class A

which of the following is NOT a characteristic of commercial investment properties...?

desirability

which... may NOT be considered a main characteristic of commercial investment properties...?

emotions

what is a major expense that may require an owner to be liquid to cover the costs...?

finding a new tenant to occupy a recently vacated space

91. 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

What is the equation for negative leverage...?

interest > cap rate

Which of the following will yield negative leverage in a deal...?

interest rate > Cap rate

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%

the use of borrowed capital (mortgage) to increase the potential return on an investment is known as what....?

leverage

95. 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

87. Which of the following is a major aspect of commercial investment properties...?

liquidity

97. Mark buys a building in which the Cap Rate is greater than the Interest Rate on his mortgage. What will Mark experience with the deal...?

o APositive Leverage

Individual retail sites in a shopping center are referred to as what...?

outparcel

as a commercial Real Estate owner, what should be your primary focus...?

the risk involved in the deal

the concept that $1 dollar today is worth more than $1 in the future is known as what...?

time value of money

Space that can be used or occupied by a tenant is known as...?

usable square footage

When will an owner experience a higher cash-on-cash return on his investment as compared to an all cash deal...?

when there is a positive Leverage in the deal