Chapter 20 Quiz

Which of the following asset classes is considered the best?

Class A (Class A assets are the best, while Class C are the worst.

If an investor purchased a property for $2,000,000 using all cash, what would be their return on investment in year one if the property yielded $260,000 in cash flow?

In this example, the ROI will equal $260,000 / $2,000,000 = . 13 or 13%.

Income earned from laundry facilities at a rental property will be included under which of the following line items?

Other income

If the capitalization rate on a property is greater than the interest rate on the mortgage, the investor will experience...?

Positive leverage

An investor is looking to purchase a property for $3,000,000. If the investor is purchasing at a 5% cap rate, what is the NOI of the property?

$150,000 (Dollars)

An investor purchased a property for $2,600,000 using all cash. What is the NOI on the property after year one if the investor earned a 10% cash-on-cash return?

$260,000 (Dollars)

What is the purchase price of a property with an NOI of $460,000 and a capitalization rate of 6%?

$7,666,667 (Dollars)

According to the IRS, a multi-family property depreciates over how many years?

27.5

An investor is looking to purchase a property for $2,500,000. If the property has an NOI of $150,000, what is the going cap rate?

6 percent

Which of the following is an example of an expense found on a pro-forma?

All of these items are expenses found on a pro-forma (Property taxes, management fees, marketing expenses)