Exam (elaborations)
REE 4103 EXAM QUESTIONS.
REE 4103 EXAM QUESTIONS.
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REE 4103 EXAM QUESTIONSA _______________ would have the lowest ratio of operating expenses to gross
income incurred by the landlord. - ANS-triple-net (absolute net)
A formal appraisal report must include the - ANS-All of the above: (Date of the value
estimate; Signature of the appraiser; Identification of the property appraised;
Certification)
A lease clause that limits the expenses of the landlord is termed a: - ANS-Expense
Clause (Expense Stop)
A property with a variable income and unknown resale price. Its holding period is
estimated at 7 years. The reversion at the end of the holding period is estimated to
increase by a total of 11% over the entire holding period. The estimated discount rate
for the property is 9%. If the net present value of just the income over the holding period
is $300,000, what is the present value of the property when taking into consideration the
reversion? - ANS-
A property with NOI of $220,000 and annual debt service of $83,000. The Rm
(mortgage constant) equals .1090, and the M (loan to value ratio) is .65. What is the
overall cap rate indicated when using the debt coverage formula? - ANS-
A reconstructed operating statement for an owner operated property should include -
ANS-· Management expense (ex: Have to reconstruct it because there's no way a
manager should be paid, say $5,000 / yr at market)
A rent multiplier - ANS-
A rent survey reveals that apartment buildings offering one-bedroom units have a
considerably higher occupancy factor than those with two-bedroom units. If the subject
property includes only units with two bedrooms, the appraisal should probably project -
ANS-a higher vacancy factor (lower occupancy factor) than was found for one bedroom
A small office building sold for $[x]. The monthly net operating income is $[y]per
MONTH. What was the overall capitalization rate? - ANS-A small office building sold for
$120,000. The monthly net operating income is $1,300 per MONTH. What was the
overall capitalization rate? V = I / R
V = 120,000
, I = 1,300 * 12 = 15,600
V = I / R so...
120,000 R = 15,600
R = 13%
A tenant who has an Exclusive Use Clause with a landlord, where the landlord later
allows a competing tenant in the same shopping center may - ANS-Exercise the clause
in a lawsuit
A value range is never - ANS-wide or narrow
All of the following lease provisions are advantageous to the lessee except -
ANS-Escalation Clause
All of the following relate to the rent level or payment schedule of a lease except: -
ANS-Financing of the property
All the following are excluded from the reconstructed operating statement except -
ANS-Excluded: Mortgage loan interest payments, Book depreciation, Business tax,
Capital costs/improvements
Included: Management charges, Fixed -- taxes & insurance, Variable - management &
utilities & maintenance, Replacement Allowance - exterior paint & kitchen/bathroom
equipment & carpeting/roof, Advertising expenses
An "as of" date is specified in appraisals to - ANS-Indicate the market conditions on
which the value is estimated (or record the date of the last inspection)
An allowance for vacancy and collection loss is estimated as a percentage of: -
ANS-Potential Growth Income
An appraiser determines that a comparable property would have a holding period of 5
years, terminal cap rate (based on Yr 6 NOI) of 13%, and estimates 5% selling
expenses. The property's purchase price was $475,000. The appraiser projects the
following cash flows for NOI: Year 1: $47,000; Year 2: $48,000; Year 3: $55,000; Year 4:
$60,000; Year 5: $45,000; Year 6: $40,000. What is the IRR (internal rate of return) for
this comparable. - ANS-An appraiser determines that a comparable property would
have a holding period of 5 years, terminal cap rate (based on Yr 6 NOI) of 11%, and
estimates 4% selling expenses. The property's purchase price was $375,000. The
appraiser projects the following cash flows for NOI: Year 1: $37,000; Year 2: $38,000;
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