Which is the most common way agents specialize with regards to commercial real estate?
specialize in a specific sector of commercial real estate.
Michael, an investor, wants to purchase a second home in order to earn some rental income. What is this an example of?
industrial real estate
commercial real estate
retail real estate
investment real estate
Jenna, a newly licensed agent, wants to change her focus from residential real estate to commercial real estate. What will she need to do in order to legally work in commercial real estate?
Jenna will need to take the commercial real estate license exam
Jenna will need to take a real estate license exam again
Nothing. A real estate license is sufficient for working in all real estate types
Jenna will need to take a broker exam
Jedidiah is interested in purchasing an apartment building in order to make some rental income. What term best describes Jedidiah?
an amenity purchaser
a commercial tenant
a developer
an investor
Leasing a property gives a business owner greater flexibility.
true
Which of the following is NOT an advantage to leasing?
ability to capture appreciation
lower amount of initial cash
flexibility
staying up to date
Which of the following is NOT an example of a common area?
a bike storage room in a condo development
a dining room in an apartment
a public bathroom at a coffee shop
a lobby in an office building
In the context of commercial leases, price per square foot reflects the:
monthly rental rate of a property
annual tax assessment of a property
annual rental rate of a property
monthly tax assessment of a property
Which is the correct formula for calculating loss factor?
(RSF – USF) ÷ RSF
(RSF – USF) ÷ USF
(USF – RSF) ÷ USF
(USF – RSF) ÷ RSF
Which of the following statements is TRUE regarding building efficiency?
Building efficiency is the ratio of usable square footage to rentable square footage.
Building efficiency is the opposite of loss factor.
Building efficiency can be found by dividing usable square footage by rentable square footage.
All choices are correct.
Net leases are most commonly used for:
residential properties
leasehold properties
commercial properties
undeveloped properties
For which type of property are percentage leases most commonly used?
industrial buildings
retail buildings
office buildings
residential buildings
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Upon the expiration of a ground lease, ownership of any construction on the land reverts to the:
lessee
builder
renting commercial tenant
original landowner
A tenant is evaluating commercial properties. They find two of similar quality, both renting for $10 per square foot. Building A has a loss factor of 20% and Building B has a loss factor of 30%. Which building would you advise renting, and why?
Building A, because it has a lower loss factor, so the tenent will get more usable square footage for the money.
Building A, because it has a lower loss factor means the tenent will not have to pay for common areas.
A bookstore has a percentage lease for its storefront. Rent is $5,000 per month plus 2% of gross monthly sales. The bookstore’s gross monthly sales are $60,000. What is the monthly rent?
$6,200
An amenity purchaser and an investor are both looking at a property. Which of these factors would be a concern for the investor, but not the amenity purchaser?
locaction
property condition
vacancy
rent rate
Of the below clients, who is interested in commercial real estate?
A young couple is looking to buy their first home.
A senior partner wants to lease a new office suite in order to meet the growing space demands of her rapidly expanding law firm.
A recent college graduate is looking for an apartment to lease in a new city where her new job is located.
A family wants to sell their starter home, as their growing family needs a house with more square footage.
A tenant has recently signed a lease for a new commercial property. According to the lease terms, the tenant pays a monthly rent, and the landlord covers maintenance and other property expenses. This lease is a:
gross lease
Which of these is most likely to have a percentage lease?
a condo in a mixed-use building in trendy Tribridge
Consolidated Cardboard’s shipping warehouse
the Lady Footlocker in the new mall
a lawyer’s office in downtown Newbridge
You are working on a transaction. The transaction takes place during business hours, is fairly risky, and requires some legal knowledge, so you are working with an attorney. The client is motivated primarily by profit. Most likely, this is what kind of transaction?
industrial
retail
residential
commercial
Steven pays for property taxes and insurance in addition to the base rent. What kind of lease does he have?
double-net
quadruple-net
single-net
triple-net
Which of the following is an example of an actual?
operating statement
proforma statement
seller’s disclosure form
listing agreement
Bella hired an analyst to examine how much she could charge in rent according to local rates if her building was 100% occupied. What is the analyst projecting?
contract rent
market rent
rent roll
rental income
Calculate the effective gross income of this building: It has $30,000,000 in gross potential income, a vacancy cost of $1,500,000, and $2,900,000 in other income.
$31,400,000
$34,400,000
$28,600,000
$25,600,000
If a building has an effective gross income of $31,400,000 and $25,000,000 in operating expenses, what is its net operating income?
$25,000,000
$31,400,000
$6,400,000
$56,400,000
The property owners of the Goliath National Bank building pay a monthly mortgage payment of $520,000. What is the annual debt service cost of the Goliath National Bank Building?
$6,240,000
All of the following are types of taxes that affect real estate investments EXCEPT:
payroll taxes
Elizabeth is calculating the after-tax cash flow of a property she invested in. The before-tax cash flow is $1,500,000. The amount of income taxes she has to pay is $215,000. What is the after-tax cash flow?
$1,285,000
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What is the total investment cost for the prospective buyers of the GNB building based on the following information? They have a $1,700,000 down payment, $200,000 in attorney fees, $50,000 in inspection fees, and $50,000 in title insurance fees.
$1.4M
$1.9M
$2.0M
$1.7M
At the listing price of $160,000,000, what is the cap rate of the GNB building? Its net operating income is $6,400,000.
4%
2.5%
40%
25%
Which of the investors’ needs is the internal rate of return most likely to meet?
Ina is looking for a property that will produce a return quickly through its cash flow.
Bob is looking for a property that he can flip and create a quick return through appreciation.
Jami wants to compare potential investments using their NOI and listing price.
Heather wants to know what percentage of the cash she invested was earned back with her property’s first-year cash flow.
Hannah purchased a home for $100,000 in cash. She spent $25,000 in repairs on the home, and then sold the home for $200,000. What’s her ROI?
6%
200%
50%
60%
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The IRR formula is useful because:
it takes into account how long an investor has to wait to get a return on their money
it minimizes the amount of taxable income and, therefore, reduces taxes owed to the government
it calculates debt service
it shows the cash profit earned as a percentage of the cash invested
Investor Irving is considering investing in a property. As he looks at potential loans, he wants to know how much money he would spend on loan payments every year if he purchased the property. What does Irving want to know?
net operating income
before-tax cash flow
annual dept service
effective gross income
To find the net operating income, a property manager will:
subtract the operating expenses from the effective gross income
add the effective gross income to the operating statement
add the operating expenses to the outgoing monthly income
subtract the effective gross income from the operating expenses
A weakness of using ROI is:
It doesn’t account for appreciation.
It cannot be used to compare which investment gives the best return.
It doesn’t account for time.
Its formula is very complex and intricate.
Josh has set aside some money to replace the roof and air conditioners in one of his properties. He isn’t planning these repairs now, but wants to have the funds ready for when he does make the repairs. What is this kind of money called?
leverage pools
debt service
common area maintenance
replacement reserves
Francine is buying a property. She has to pay attorney fees, bank fees, tax escrow, recording fees, and a mortgage tax. What are these fees?
debt service
closing costs
effective gross income
maintenance fees
Effie wants to find the return on her investment. What should she do?
Multiply the investment profit by the investment cost.
Add the investment profit to the investment cost.
Subtract the investment profit from the investment cost.
Divide the investment profit by the investment cost.
What is a proforma statement?
a report that lists the number of units in a property
a statement that shows the projected profits and expenses for an investment property over a time period
a property’s financial statements for the previous 12 consecutive months
a financial statement that shows the financial history of an income-producing property
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Your client is looking at an 8,000 square-foot office space. The annual rent is $50,000. They want to know what the price per square foot of the office is. What do you tell them?
$0.16
$1.60
$6.25
$10
The property owners of the Wallace Building pay $30,000 each month for their mortgage payment. They pay 12 mortgage payments every year. What is the annual debt service cost of the Wallace Building?
$360,000
$15,000
$180,000
$30,000
The property owners of the Lockwood Building pay $16,000 each month for their mortgage payment. They pay 12 mortgage payments every year. What is the annual debt service cost of the Lockwood Building?
$96,000
$16,000
$192,000
$1,333,000
Clarissa bought some fancy sneakers for $200. Five years later, she sold the sneakers for $1,000. What was her return?
$2,000
$800
$500
$1,200
Jen recently purchased an apartment building. She put down $150,000 as her down payment and spent $45,000 in attorney fees, $11,000 in escrow fees, and $20,000 in inspection fees. What was her total investment cost?
$234,000
$206,000
$195,000
$226,000
Dr. Avery Adams just opened a new office location. Her private office space is 8,300 sq. ft. She also has access to a 700-square-foot lobby and 1,000 sq. ft. of shared restroom space. How many usable square feet does Dr. Adams’s office have?
6,400 sq. ft.
8,300 sq. ft.
9,000 sq. ft.
10,000 sq ft.
Which lease is most commonly used for retail properties?
gross lease
net lease
precentage lease
ground lease
An investor is trying to find a building’s potential gross income. Here is the information available about the building: Contract rent = $15,000 , Projected rent = $20,000 , Vacancy cost = $5,000 , Operating expenses = $2,000 ?
$40,000
$33,000
$37,000
$35,000
Which lease requires tenants to give a portion of their sales to the property owner?
percentage lease
ground lease
net lease
gross lease
An investor wants to know a realistic estimate for how much a property might make for them. They want to know the total income (rental plus non-rental), and at this point, they are not interested in expenses. What metric do they want to know?
vacancy cost
effective grosss income
other income
gross potential income
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