Chapter 1

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: -walkways -building -sewer system -streets

building

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

discounting

Real estate is defined as land and its permanent improvements. Which of the following is an example of an improvement TO the land? -fence -building -sewer system -personal property

sewer system

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

"raw" or undeveloped land

The required rate of return that an individual demands on real estate investment is determined in the:

capital market

Consistency the investment target of pension funds, publicly traded real estate companies, and real estate funds, large commercial properties valued well over $10 million are often referred to as:

investment-grade property

Which of the following would be considered a tangible asset?

land

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

location attributes

All the following are examples of an improvement ON the land except: -fences -building -walls -streets

streets

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

the current level of rental rates for each submarket and property

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

mortgage

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?

state government

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

If a property's expected annual net income is $89,100 and its current market value is $1,060,000, the property's capitalization rate is

8.4%

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

Considered a fundamental pricing metric in commercial real estate markets, the ratio of a property's annual net income to its market value is more commonly referred to as a(n): A. Appreciation rate B. Capitalization rate C. Discount rate D. Internal rate of return

capitalization rate

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 the

collection of rent and property appreciation

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

commercial mortgage backed securities (CMBS)

When viewed as a tangible asset, real estate can be defined as the land and its permanent improvements. Improvements ON the land include: -fences -walkways -sewer systems -streets

fences

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

heterogeneous

Equity investors can choose to participate indirectly in real estate markets by purchasing shares in publicly traded real estate companies. In doing so, investors benefit from all of the following except: -low transaction costs -risk sharing amongst investors -highly segmented markets -high information efficiency

highly segmented markets

In 2015, the largest single asset category in the net worth portfolios of households is:

housing

The national government can have a significant impact on the value of real estate through: -property tax policy -income tax policy -building codes -real estate licensing requirements

income tax policy

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

increase if current property values are greater than the cost of construction

The investment grade property market is typically targeted by all of the following groups of investors except: -pension funds -individual investors -listed equity REITs -real estate private equity funds

individual investors

The size of a single family residential lot is typically:

less than one acre

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

local government

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: A. localized markets B. highly segmented markets C. privately negotiated contracts D. low transaction costs

low transaction costs

Capital markets can be divided into four main categories: private equity, public equity, private debt, and public debt. An example of real estate asset that trades in the private equity market is: -real property -home mortgages -municipal bonds -commercial mortgage-backed securites

real property

Real estate markets tend to be highly segmented due to the heterogeneous nature of the products. Which of the following examples depicts this issue of market segmentation?

a couple searching for a single-family detached unit has limited their search to be in a specific price range between $350,000 and $400,000

By the fourth quarter of 2015, U.S. households had accumulated $12.5 trillion in housing equity, which represents about 14% of their net worth. What portion of U.S. households own their home?

two-thirds