Here is an exam that needs to be completed, it is about real estate and related calculations.
Mid-Term W16 Summer 2021 Mid-Term Student: • Use the provided answer sheet on the last page, any answers not placed there will not be counted. • Questions are multiple choice or T/F as indicated. • All $/PSF figures are annual figures. • Questions 1-40 are worth two points each; questions 41-42 are worth varying amounts as indicated 1. Which type of deed offers the grantee the most protection? a. Quitclaim deed b. Special warranty deed c. General warranty deed d. Officer's deed 2. A reciprocal easement agreement allows two or more parties to access each other's property. (T/F) 3. What legal document conveys title from one person to another? a. Mortgage b. Note c. Deed d. Title 4. After a house is purchased, contractors cannot ask the new owner of the house to pay any bills that were outstanding before the house was sold. (T/F) 5. An historical summary of the publicly recorded documents that affect the ownership of a property is known as a(n): a. Estate b. Deed c. Abstract of title d. Lien 6. A mortgage is BEST defined as a legal document that: a. creates an obligation to repay a loan under specific terms. b. names real estate as the security or collateral for the repayment of a loan. c. defines a possessory interest in real estate. d. conveys ownership of a property to its purchaser. 7. Overage rent is rent that exceeds expenses. (T/F) 8. An impound account collects monthly payments from the borrower that are used to pay the property tax and insurance bills due on the collateral. (T/F) 9. It is a federal law that a mortgage must be recorded to be valid. (T/F) 10. The use of a CPI index in a lease contract shifts risk to the tenant (T/F) 11. The difference between the existing stock of space and the equilibrium occupancy is known as: a. supply b. demand c. equilibrium d. vacancy 12. The supply of space is: a. inelastic in both the short run and the long run. b. elastic in both the short run and the long run. c. inelastic in the short run, and elastic in the long run. d. elastic in the short run, and inelastic in the long run. 13. Expenses for a 1,000 square foot office space are $6.00 per square foot. The lease specifies an expense stop of $5.40. What is the net expense paid by the landlord? a. $5,400 b. $6,000 c. $600 d. $0 14. A 1,500 square foot office space is leased at $12.00 square foot. The space is vacant one month out of the year. Office expenses are $6.50 per square foot and an expense stop is set at $6.00 per square foot. What is the annual net operating income? a. $7,577 b. $6,762 c. $7,437 d. $8,250 15. A clause in a non anchor tenant's lease requiring the presence of an anchor tenant is referred to as a a. Non-compete clause b. Co-tenancy clause c. Joint tenancy clause d. Anchor clause 16. A 1,000 square foot office space is leased at $15.00/square foot during the first year with $2.00 step-up provisions each of the following years. The lease is gross with an expense stop set at $6.65/square foot, and yearly expenses/square foot are as follows: $6.00, $6.65, and $7.05. If the lease term is three years and the discount rate is 8%, what is the building worth? a. $27,010 b. $26,693 c. $28,876 d. $26,567 17. Which does the term anchor tenant usually refer to? a. Someone who leases space at a marina b. The largest tenant in an office building c. A department store in a mall d. The tenants who pay the highest rent in a mall 18. What is does an expense stop do in a lease? a. Stops expenses from increasing b. Expenses above the stop are paid by the owner c. Expenses above the stop are paid by the tenant d. Expenses below the stop are paid for by the tenant 19. Which of the following is TRUE for a net lease? a. All expenses are paid for by the owner b. All expenses are paid for by the tenant c. All expenses are paid by the lender d. All expenses are paid by the investor 20. Which of the following tends to lower effective rents? a. Percentage rent b. Step up provisions c. Concessions d. CPI adjustment 21. Which does the term "in-line tenants" refer to? a. Smaller stores in a mall that are not anchor tenants b. Tenants whose sales are in line with estimates c. Tenants who pay their rents on a timely basis d. Stores that are located inside the mall including anchors 22. For which of the following reasons would a business prefer to own space rather than lease it? a. The business demands specialized or unique facilities b. Owning allows the business to develop skills in operating, maintaining, and repairing real estate c. Owning reduces operating flexibility d. The capital commitments with owning are lower than the capital commitments associated with leasing e. All of the above are reasons a business would prefer to own space rather than lease it 23. The term "percentage rent" refers to rent paid as a percent of space leased. (T/F) 24. Real estate refers to the physical land and improvements constructed on the land. (T/F) 25. A quitclaim deed says that the grantor “quits” whatever claim he has in the property in favor of the grantee. (T/F) 26. An overall capitalization rate can be calculated by dividing the net operating income by the property value. (T/F) 27. When calculating NOI, the vacancy factor represents the long term vacancy level expected in the project. (T/F) 28. You company has a required rate of return of 7 percent and is looking to purchase a building. You are looking to obtain a 6% cap rate and the year 1 NOI will be $80,000, expected to grow at a rate of 2 percent per year. As part of your analysis, you must calculate the reversion value at the end of year 5, which would be: a. $1,261,806 b. $1,358,868 c. $1,472,107 d. $1,766,529 29. In the cost approach to value, deductions must be made for physical deterioration, functional obsolescence and external obsolescence. (T/F) 30. A property is sold for $2,000,000. If the NOI is $130,920, what is the overall capitalization rate? a. 5.67% b. 6.54% c. 6.99% d. Unable to calculate with the provided information. 31. Which of the following is TRUE concerning the capitalization rate? a. It is an IRR b. It explicitly considers projected future income and changes in property value over time c. It expresses relationships between income and property value at a specific point in time d. It is the rate of return that investors expect to earn on all capital invested 32. Regarding the value of a property, an appraisal: a. Calculates value b. Confirms value c. Estimates value d. Determines value 33. A comparable property has a feature that is superior to the subject property. What adjustment would be made in the sales comparison approach to value a. Value of the feature would be subtracted from the sales price of the comparable property b. Value of the feature would be added to the sales price of the comparable property c. Value of the feature would be subtracted from the value of the subject property d. Value of the feature would be added to the value of the subject property 34. Which of the following expenses would NOT be included in an operating statement used to calculate net operating income in the income approach to value: a. Insurance b. Maintenance c. Real estate taxes d. Capital additions 35. The capitalization rate is equal to the discount rate minus any expected annual growth in income and property value. (T/F) 36. A property produces a first year NOI of $100,000 which is expected to grow by 2% per year. If the property is expected to be sold in year 10, what is the expected reversion value based on a terminal capitalization rate of 9.5% applied to the eleventh year NOI? a. $1,308,815 b. $1,283,152 c. $1,263,158 d. $1,257,992 37. A property produces a first-year net operating income of $24,000 which will grow by 2.5% per year. Using a five year hold, a discount rate of 9.5% and an resale cap of 5%, the property value is estimated at: a. $515,375 b. $458,809 c. $520,197 d. $415,097 38. A property is leased for $24,000 per year although market rents are currently $27,500 per year and are expected to increase by 2% per year. The property is expected to be sold at the end of year 10 based on a 10% terminal cap rate applied to the eleventh year NOI. The current lease on the property will expire at the end of year 10 so the property can be leased in the eleventh year at market rates. What is the value of the property estate based on an 11.5% discount rate? a. $362,489 b. $298,325 c. $251,298 d. $271,486 39. Capitalization rate of newly constructed apartment building will be more than that of relatively old apartment building, which is comparable in all other aspects. (T/F). 40. You need to save $50,000 for a home purchase