Exam (elaborations)
REE 5305 Unit 5 Chapter 11 (1).
REE 5305 Unit 5 Chapter 11 (1).
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REE 5305 Unit 5 Chapter 11The debt coverage ratio is used by lenders to indicate the riskiness of a loan.
Group of answer choicesTrueFalse - ANS-true
Expense stops shift the risk of increases in expenses to the lessee while allowing the lessor to
retain the benefit of any decrease in expenses.
Group of answer choicesTrueFalse - ANS-true
When calculating IRR, the projected cash flows are discounted such that they will equal the
initial investment amount.
Group of answer choicesTrueFalse - ANS-true
The use of a CPI index in a lease contract shifts risk to the tenant.
Group of answer choicesTrueFalse - ANS-true
Which of the following is FALSE regarding an expense stop?
Group of answer choicesThe stop is often based on the actual amount of operating expenses at
the time the lease is signed.Expenses to be included must be agreed upon and included in the
lease.The passthrough is based on the tenant's percentage of total leasable area.All operating
expenses are covered by the stop. - ANS-all operating expenses are covered by the stop
Which of the following is FALSE regarding DCR?
Group of answer choicesIt indicates whether NOI is sufficient to cover mortgage payments.It is
derived from NOI divided by the mortgage payment.It is an indication of risk for the lender.It is
not of concern to lenders when loan to value ratios are low. - ANS-it is not of concern to lenders
when loan to value ratios are low
Which of the following statements is TRUE regarding the real estate industry?
Group of answer choicesIt is highly competitive.It is relatively concentrated, with a few owners
controlling most of the market in most areas.It is a relatively small market.All of the choices are
true statements. - ANS-it is highly competitive
Which of the following is FALSE regarding expense stops?
Group of answer choicesExpense stops protect owners against increases in expenses.Expense
stops are usually based on expenses during the first term of the lease.Expense stops can pass
through expense savings to tenants.Expense stops provide some protection against inflation. -
ANS-expense stops can pass through savings to tenants
CPI adjustments shift the risk of unexpected inflation to the lessor.
Group of answer choices
True
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