Questions and Answers of Real Estate Principles

What are the Returns and Risks currently for the different asset classes?
What is the P(Gain) for each?
What does the time series state when graphing from the Financial Crisis to the current day for each of the asset classes?
Graph the residential and commercial year-over-year time series. Does residential lead commercial? By how many months? Is the relationship statistically significant?
Compare the average returns for equity, debt and the major real estate asset classes for the last 5-, 10-, and 15-year periods. The asset classes are equity (S&P 500), debt (VBMFX), office, retail,
Calculate and graphically demonstrate the risk of each asset; see above.
Calculate the P(Gain) of each asset class (see above) and compare each. Which is most efficient?
Graph the returns for residential and commercial on a time series. Does there appear to exist a lead/lag relationship? If so, by how many months? Is the relationship statistically significant?
John has borrowed $50,000 at 5.00%/year for five years. How much interest has accrued at the end of five years if using simple interest?
Assuming there was no principal pay down during the five years, what is the ending balance for John (see problem #1) at the end of five years?
Ayla has borrowed $75,000 at 6.00% for six years. How much interest has accrued over the six years, and what is the total outstanding balance assuming no principal pay down and simple interest
Chandler invests $25,000 for 10 years in a financial product with a guaranteed compounded annual return of 4.00%. What is Chandler’s account balance at the end of 10 years?
Lena lends $15,000 to her daughter to purchase a car but expects to be repaid in three years. Lena expects her daughter to pay her 3.00% annual compounded return. What will Lena’s daughter owe at
Jason invests in tax credits that accrue interest at 18.00%. He invests $20,000 and expects full repayment at the end of the 24th month. What will Jason’s payment be at the end of month 24?
An investor invests $$50$,000 in an insurance product that is guaranteed to return $$75$,000 in two years. What is the annual rate of return for the product?
An investor purchases an asset for $450,000 and expects the market to return 6.00%/year for 10 years. What is the investor’s final sale price for the asset at the end of 10 years?
An investor realizes the market value of a property is $$798$,000. The investor purchased the property eight years ago for $$530$,000. What is the investor’s annual rate of return for the eight
The investor invests $10,000 into an account that pays 6%/year compounded quarterly.At the end of the year, what is the balance of the account?
The investor invests $25,000 into an account that pays 5%/year compounded semiannually.At the end of three years, what is the balance of the account?
The investor invests $45,000 into an account that pays 4%/year compounded monthly.At the end of four years, what is the balance of the account?
A loan with principal balance of $2,500 and structured as a CPM-style amortization having 6.00% fixed interest will cause the borrower to pay how much in interest on a pretax basis? (Note: Interest
A loan with principal balance of $7,550 and structured as a CPM-style amortization having 4.50% fixed interest will cause the borrower to pay how much in principal on a pre-tax basis?
A loan with principal balance of $11,500 and structured as a CPM-style amortization having 6.50% fixed interest will cause the borrower to pay how much in total payments over the life of the loan on
A loan with principal balance of $2,500 and structured as a IO-style amortization having 6.00% fixed interest will cause the borrower to pay how much in interest on a pre-tax basis?
A loan with principal balance of $7,550 and structured as a IO-style amortization having 4.50% fixed interest will cause the borrower to pay how much in principal on a pre-tax basis?
A loan with principal balance of $11,500 and structured as a IO-style amortization having 6.50% fixed interest will cause the borrower to pay how much in total payments over the life of the loan on a
A loan with principal balance of $2,500 and structured as a Custom Amortizing style amortization having 6.00% fixed interest will cause the borrower to pay how much in interest on a pre-tax basis?
A loan with principal balance of $7,550 and structured as a Custom Amortizing style amortization having 4.50% fixed interest will cause the borrower to pay how much in principal on a pre-tax basis?
A loan with principal balance of $11,500 and structured as a Custom Amortizing style amortization having 6.50% fixed interest will cause the borrower to pay how much in total payments over the life
A loan with principal balance of $8,750 and 6.00% fixed interest is considered. The analyst must consider each of the three basic loan structures, i.e. CPM, IO, and Custom Amortization. What is the
A loan with principal balance of $12,550 and 4.25% fixed interest is considered. The analyst must consider each of the three basic loan structures, i.e. CPM, IO, and Custom Amortization. What is the
A loan with principal balance of $22,500 and 7.75% fixed interest is considered. The analyst must consider each of the three basic loan structures, i.e. CPM, IO, and Custom Amortization. What is the
A loan with principal balance of $650,000, 25 years, and 5.25% fixed interest. The analyst must consider each of the three basic loan structures, i.e. CPM, IO, and Custom Amortization. There is no
A loan with principal balance of $725,000, 20 years, and 5.75% fixed interest. The analyst must consider each of the three basic loan structures, i.e. CPM, IO, and Custom Amortization. There is a
A loan with principal balance of $1,025,000, 30 years, and 5.75% fixed interest. The analyst must consider each of the three basic loan structures, i.e. CPM, IO, and Custom Amortization. There is a
Tommy has two loan alternatives: (1) $$700$,000 at a fixed rate of 4.00% for 25 years or (2) $$800$,000 at a fixed rate of 5.00% for 25 years. What is the incremental cost of borrowing (Must show
Alan purchased his home for $100,000 at a 5.0% interest rate. What is the payment if he amortized the loan over two (2) years? (Must complete by hand showing all work.)
James has a mortgage balance of $200,000 on his home. He just refinanced with the following terms: (1) 3.55% fixed rate and (2) 25-year amortization/term. What is his monthly payment? (Must show
If Grant pays $$5$,000/month instead of the minimum payment required, how many months will it take him to pay off a $$400$,000 mortgage at an interest rate of 3.0% for 30 years? (Must show HP-12C
A $850,000 mortgage is financed using a 30-year constant payment product at 3.50% interest. Assuming that the loan is held to maturity, i.e., the house is paid off, without any refinancing, in 30
It is 22 April 2015 and you are completing your taxes, albeit late, for 2014. You purchased your house for $600,000 on 1 January 2010 and financed 80% at 5.0% for 30 years using a constant payment
Carrie Mathison is considering purchasing a home for $$150$,000 and flipping it in three years. The expected rent is $$1$,200/month and expenses are $$200$/month. Ms. Mathison anticipates a
Saul Berenson is considering purchasing a home for $$350$,000 and flipping it in four years. The expected rent is $$4$,000/month and expenses are $$1$,000/month. Mr. Berenson anticipates a
Peter Quinn is considering purchasing a home for $$200$,000 and flipping it in three years.The expected rent is $$2$,000/month and expenses are $$100$/month. Mr. Quinn anticipates a rental
Nick Brody is considering purchasing a home for $$600$,000 and flipping it in four years.The expected rent is $$3$,500/month and expenses are $$750$/month. Mr. Brody anticipates a rental
Jessica Brody is considering purchasing a home for $$200$,000 and flipping it in three years. The expected rent is $$1$,500/month and expenses are $$150$/month. Mrs. Brody anticipates a rental
The current model, as constructed, has a Leveraged IRR = 27.66%. If the Sales Velocity is adjusted to “1.00”, indicating that each unit type shifts the start date by 30 days, how does the
If the Sales Velocity is then adjusted to 5.00, indicating that each unit type shifts 150 days, i.e. 30 × 5, how does the Leveraged IRR Change?
As the new developer for this project, your goal is to select the option that maximizes returns and convinces the lender to sell the project to you and stay in the deal financing 80% of cost,
The final parcel in the financial district has been placed for sale. It was owned by an old Chicago family who is now looking to cash in on real estate holdings. The sale has been approved by the
What is the current ratio for the period 5?a 1.96 b 2.02 c 2.15 d 2.23
What is the cash ratio for period 14?a 0.42 b 0.56 c 0.81 d 0.92
What are the Days Sales Outstanding for Year 3?a 29.85 b 29.94 c 30.02 d 30.14
What is the Total Asset Turnover for Year 6?a 0.17 b 0.21 c 0.23 d 0.25
What is the Working Capital Turnover for Year 5?a 1.22 b 1.27 c 1.31 d 1.33
What is the Total Debt for period 18?a 0.56 b 0.59 c 0.65 d 0.67
What is the Debt/Equity ratio for period 27?a 1.94 b 2.05 c 2.09 d 2.14
What is the DSCR for period 48?a 2.79 b 2.84 c 2.92 d 2.97
What is the Gross Profit Ratio for year 6?a 0.39 b 0.42 c 0.47 d 0.51
What is the Net Income to Sales ratio for year 3?a 0.11 b 0.14 c 0.18 d 0.21
What is the RoA for year 8?a 0.02 b 0.03 c 0.04 d 0.05
What is the RoE for year 7?a 0.09 b 0.10 c 0.11 d 0.12
a Utilizing the information from question 6a, find the coefficient of variation and the z-score.question 6a,Define risk for a project with a (1) best case scenario providing a 20% return and a 10%
A project with an outflow of $$50$,000 in year 0 followed by inflows of −$$10$,000, $$8$,000, $$12$,000 and $$46$,000 has an IRR of _____. Assume there is a reduction in the CF0 by
Assume a project has a CF0 of $$200$,000. The investment is expected to generate $$5$,000 dollars annually for the next ten years followed by a return of the principal investment, $$200$,000.
An office space located within the Dallas-Fort Worth Metroplex currently maintains an annual revenue of $$150$,000. Operating expenses are $$40$,000 and the property’s annual debt service is
Assume a project has a Net Income of $$70$,000, the project has operating expenses of $$40$,000 and a debt service of an additional $$38$,000 annually. New management find means to cut cost to
Calculate the IRR for the following project. An outflow of $$14$,000 in year 0 followed by an inflow of 0 for two years with $$16$,000 returned in the third year. How does this change if the cash
For the scenarios listed above, what is the IRR (or XIRR) for these cash flows if returned on a monthly as opposed to annual basis?a 74.86%, 90.38%b 70.8%, 84.37%c 81%, 80.9%d 70.8%, 80.9%
Determine the Capitalization Rate for a property with a sales price of $$400$,000 and an expected Net Operating Income (NOI) of $$18$,000 in the year following the property’s sale.a 4.25%b
Determine the NOI for a property with a Capitalization Rate of 5.5% and a sales price of $$1$,000,000.a $$55$,000 b $$50$,000c $$60$,000 d $$50$,500
Determine the sales price for a property with an expected NOI of $$26$,000 and a Capitalization Rate of 9%.a $$288$,880 b $$276$,888c $$288$,888 d $$288$,276
An investor is considering purchasing a 4-unit multifamily but is limited on capital.The individual has $$125$,000 and the purchase price is $$625$,000. The individual has a commitment from a
A small multifamily rental property can be funded with either 100% equity or 100% debt financing. Under the equity option, the property will require $$550$,000 of capital in CF0 and return annual
Assume a project has a CF0 of $$100$,000. The investment is expected to generate $$5$,000 annually for the next four years followed by a return of the principal investment, $$100$,000. If the
A small multifamily rental property is being acquired for $$1.5$ million at 65% Loan-to-Value. The current products offered are a CPM note for 5.85% annual interest over a 30-year term and a
Assuming we are examining the project described in the question above, what is the difference between the total interest payments at the end of the loan’s life span? What rate would the fixed
What strategy provides a contract to buy an asset for a certain price at a later date for the cost of a premium?a Long call b Short call c Short put d Long put
What strategy enables an individual to hedge against future risk by agreeing to a price today?a Long future b Short future c Long call d Short call
Calculate the NPV for the following project. An outflow of $$14$,000 in year 0 followed by an inflow of $$6$,000, $$7$,000, and $$7$,000 in one-year increments with a discount rate of 8%.a
Calculate the NPV for the following project. An outflow of $$10$,000 followed by an inflow for three years of $$2$,500 and a single inflow in the final year of $$6$,000 with a cost of capital
What change to NPV occurs when discount rate for both problems is reduced by half?a $4,526.10/$2,123.21 b $4,464.10/$2,130.19 c $4,464.12/$2,130.19 d $4,526.12/$2,123.21
Calculate the IRR for the following project. An outflow of $$14$,000 in year 0 followed by an inflow of $$6$,000, $$7$,000, and $$7$,000 in one-year increments.a 12.5%b 18.5%c 20%d 21.5%
Calculate the IRR for a project with $$10$,000 of initial cash outflow followed by three years of $$2$,500 cash inflows and a single lump sum inflow in the final year of $$6$,000.a 13%b 12%c
Assuming $$100$,000 is invested today, for the next three years $$12$,000 is returned annually, and in the fourth year a lump sum of $$80$,000 is provided. What is the IRR of this series of
Assuming $$25$,000 is invested today, next year $$2$,500 is returned, and in the second year the full $$25$,000 is returned. What is the IRR of this series of cash flows? Assuming that
a Investment type i Draw a cash flow diagram for an investment with an initial cash outflow of $$30$,000 followed by a three-year period with an inflow of $$5$,000 and a Return OF Capital in year
a Determine the capitalization rate for a property with a sales price of 600,000 and a Net Operating Income (NOI) of 42,000.b Determine the NOI for a property with a capitalization rate of 7%
a Calculate the NPV for the following project. An outflow of $$110$,000 in year 0 followed by an inflow of $$40$,000, $$45$,000, and $$50$,000 in one-year increments with a discount rate of
a Calculate the IRR for the following project. An outflow of $$8$,000 in year 0 followed by an inflow of $$3$,000, $$3$,500, and $$3$,500 in one-year increments.b Calculate the IRR for a
a Assuming $$120$,000 is invested today, for the next three years $$24$,000 is returned annually, and in the fourth year a lump sum of $$70$,000 is provided. What is the IRR of this series of
a Define risk for a project with a (1) best case scenario providing a 20% return and a 10% probability, (2) a most likely scenario consisting of a 12% IRR and a 70% probability of occurring, and (3)
What are holdbacks in construction lending? Why is the practice of holdbacks used?
An institutional investor is comparing management fees for two competing real estate investment funds. Both funds expect to begin operations and are accepting capital commitments. When the funds
The ABC Corporation is considering opening an office in a new market area that would allow it to increase its annual sales by $2.5 million. The cost of goods sold is estimated to be 40 percent of
What are title records? What is an abstract of title?
A closed-end, commingled opportunity fund is being created with an expected three-year life. It expects to acquire properties that it expects to turnaround and sell at the end of three years for a
A fund has an initial investment of $100 million from investors. The investors will receive an 8 percent preferred return. After the preferred return is met, remaining distributions will be split 80
Name the four general real estate investment styles and describe each. Identify three specialized styles within these general categories and give examples for each.
What is a deed? How is it different from the title?

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