REE 3043

Economist suggest that the value of something results from its utility and what?

usefulness
demand
price
scarcity

A branch of economics that extends the basic ideas of the early classic and neoclassical economists to better understand and predict how humans use space is termed:

spatial economica
city economics
urban economics
building economics

Formal arrangements and associations that members of society make to support fundamental econoics and social activities are refered to in the text as:

contracts
institutions
covenants
firms

Marshall contended that in a perfect market the value of a good...

was equal to its price
should be more than the costs of production
should be less than its price, otherwise it is not profitable to manufacture
none of the above

!!!!!!!!!!!

Commercial mortgages held in the portfolios of lenders are generally refered to as?

securitized commercial property
unsecuritized commercial property
securtized commercial mortgages
unsecurtized commercial mortgages

Stocks, bonds, and cash are generally classified as:

real assets
financial assets
monetary assets
securities

real estate is the US represents approximately what portion of the worlds wealth?

15
35
50
70

approx______ of the wealth of real estate in the US accures to residential property

15 35 50 75

according to the text, business real estate (excluding farmland) accounts for approx __ percent of the total value of realestate in the US?

15
35
50
75

The text organized to describe the following five perespectives of real estate

investments, market,valuation,mortgage finance, and legal
investment, market, mortgage, business, and legal,
property,business,mortgage,legal,and brokerage
property,business,valuation,market,and legal

t-f early economists conclude that land, labor and credit were the resources of society that were conbined by entrepreneurs to form useful products

t-f
Alfred Marshall, an economist, argued that value results form the intersection of supply (cost) and demand (utiltiy)

Urban economist constitutes a branch of economics that focus on urban problems, especially housing issues

the fundamentals of supply and demand explain all aspects about individual and market behavior in valuing space

In addition to affecting market operations, lease contracts serve to formally identify a peoperty's rent and the intersection of supply and demand

real estate can be defined as both a financial asset and a real asset

consistent with an open economy, most of the land in the united states is privatley ownder

According to the text, real estate represents about half of the worlds wealth.

Commercial real estate consistutes the most valuable component of the US real estate market,

Commercial real estate owners carry more debt (as a percentage of the total property value) than residential property owners.

A purchase price of $26.988 is required to achieve a return of 10 percent per year if the expected price for a vacant parcel is $70,000 in 10 years (assuming no transaction or holding costs)

The term borrowing cost, including the effect of up-front financial cost.

Amortization
capitalization rate
debt service
effective cost
effective yield
interest
interest-only loan
internal rate of return
investment value
loan amortization schedule
market value
net present value
sinking fund
yield to maturity

Calculated as expected cash flow in year one divided by the initial acquisition price, it is measured of the current relationship between a property income stream and price

Amortization
capitalization rate
debt service
effective cost
effective yield
interest
interest-only loan
internal rate of return
investment value
loan amortization schedule
market value
net present value
sinking fund
yield to maturity

The discount rate which equates the present value of the cash inflows to the present value of the cash outflows
Amortization
capitalization rate
debt service
effective cost
effective yield
interest
interest-only loan
internal rate of return
investment value
loan amortization schedule
market value
net present value
sinking fund
yield to maturity

The difference between the present value of the cash inflows and the present value of the cash outflows

Amortization
capitalization rate
debt service
effective cost
effective yield
interest
interest-only loan
internal rate of return
investment value
loan amortization schedule
market value
net present value
sinking fund
yield to maturity

The value of the property to a paticular investor

Amortization
capitalization rate
debt service
effective cost
effective yield
interest
interest-only loan
internal rate of return
investment value
loan amortization schedule
market value
net present value
sinking fund
yield to maturity

The price a typical buyer would pay should the property be placed on the market for sale

Amortization
capitalization rate
debt service
effective cost
effective yield
interest
interest-only loan
internal rate of return
investment value
loan amortization schedule
market value
net present value
sinking fund
yield to maturity

The value of income-producing property depends on its expected cash flows, the timing of those cash flows,a nd the riskiness of the cash flow.

real estate investors earn returns on their investments from two basic components: income from the rental of the property and the tax sheltering charistics of real estate

Investment risk is defined as the probability that actual cash flows will differ from what is expected

most real estate investors are risk seekers rather than risk averse

the value of $1 deposit today that accumulates at 12% per year compounded monthly, is worth $1.76 in 5 years

the present value of a 10$ ordinary annuity, discounted at a 15 percent annual rate and received each month for 10 years is 619.83

The future value of a $100 payment received as an annuity due, discounted at 8 percent per year, and recieved each year for 30 years is $11,328

The present value of a property that is expected to yield $9,000 at the end of the month (after expenses) for one year and can be sold at the end of the year for $1,000,000 (assume the market discount rate is 12% per year) is $901,857

The outstanding balance on a mortgage loan can be calculated as the present value of the remaining payments, discounted at the contract interest rate.

A statment by a real estate investment trust that is invests only in appartment buildings that are larger than 50 units and less than 10 years old is an example of an investment:

strategy
philosophy
objective
policy

the rent that can be obtained when leasing a property in an open and competitive market is termed:

contract rent
market rent
fair rent
justifiable rent

income properties are purchased by investors who desire primarily to receive:

periodic income and appreciation
prestige and prominence in community
tax deductions
the local benefits associated with property ownership

A measure of the extent to which NOI can decline before it is insufficient to service the debt, defined as net operating income over debt service.

Contract rent
debt coverage ratio
equity dividend rate
market rent
operating expense ratio

the percent of an equity investment returned in cash, before income taxes, for one year.
Contract rent
debt coverage ratio
equity dividend rate
market rent
operating expense ratio

the rent that could be obtained by renting a property on the open market
Contract rent
debt coverage ratio
equity dividend rate
market rent
operating expense ratio

the rent specified in the lease contract.
Contract rent
debt coverage ratio
equity dividend rate
market rent
operating expense ratio

An investment philosphy outlines mainly outlines whether the real estate investor will be an active or passive investor

the rent rate specified in the lease contract is termed "market rent"

while income property markets are local, most income properties tend to be purchased by national investment companies such as REITs.

the presentation of projected contract rents int he first year of operations is known as the property's rental roll

an often critical step in reconstruction the operating statement for a property to determine its value is evaluated whether the existing contract rents are equal to market rents.

the current rent that can be obtained by offering the property in the open market is termed market rent

net operating income minus leasing and capital costs is termed by the text " the before tax cash flow"

major property improvememnt expenses that do not occur on a frequent and periodic basis such as roof replacememnt, tenant improvement, and leasing commissions are referred to as fixed costs.

the net selling price is estimated by subtracting the expected selling expenses from the expected selling price

the discount rate at which the NPV of the cash flows from an investment equal zero is termed break-even point.

What are the 4 classes of real property?

3 income subjects subject to federal taxation

the purpose of federal income tax, an apartment complex purchased and held by an investor renting spaces to tenants is classified as:

investment property
income-producing property
business property
dealer property

the dividends distributed to investors in a real estate investment trust are classified as?

unearned income
earned income
passive activity income
portfolio income

under current federal income tax law, for property obtained after 1994, the allowable cost recovery period for owner-occupied single-family residential income property is:

27.5
31.5
39
none of the above

the total tax paid by a tax payer, divided their taxable income is termed:

the marginal tax rate
average tax rate
capital gains tax rate
millage rate

for individuals and partnerships, tax losses from passive activities can be used to offset positive taxable income from:

other passive activities
stock and bond investment
wage and salary
real estate dividend income

if a real estate investor (sole owner) is an active participant, passive tax losses from the investment may in some cases be used to offset:

wage and salary
dividen income
portfolio income
all of the above

real property held for resale to others by contractors and brokers is classified by the IRS as "business property"

income earned from salaries, wages, and commissions is termed earned income

when evaluating wheather or not to invest in a project, the investment analysis should consider the investors marginal tax rate, as opposed to the investors average tax rate

the income and expenses associated with directly owning rental property, either in the form of a sole proprietorship or a partnership,a re included as "income from rental real estate, royalties, and partnership" ont he federal tax form

if the taxable income on a property is greater than the before tax cash flow, the property has tax sheltering characteristics.

reserves that are set aside to be used in the future to replace capital item can be deducted from the property's income for tax purposes

for income property, up-front financing costs are not fully deductible int he year in which they are paid. the cost must be amortized over the term of the loan.

raw land purchased by an investor looking to develop a residential subdivision int he future can be depreciated

residential income property purchased today is depreciated over a 29.5 year period/

Tax credits on low income housing may be applied to reduce the taxes on active and portfolio income, regardless of whether the developer "materially" participates.

Corporate ownership structure which provides limites liability, however, it is not a separate taxable entity. Income and losses may flow through to each stockholder.

C Corporation
general partnership
joint venture
limited venture
real estate investment trust
S corporation
sole proprietorship
syndicate

A corporation ownership structure which provides limited liability. More than 75% of its gross income must be derived from real estate

C Corporation
general partnership
joint venture
limited venture
real estate investment trust
S corporation
sole proprietorship
syndicate

A partnership in which at lease one party assumes unlimited liability while the other parties' liability is limited

C Corporation
general partnership
joint venture
limited venture
real estate investment trust
S corporation
sole proprietorship
syndicate

ownership structure where all cash flow and income tax consequences flow through directly to a single individual's income tax return

C Corporation
general partnership
joint venture
limited venture
real estate investment trust
S corporation
sole proprietorship
syndicate

an ownership from characteristized by multiple owners, unlimited liability for each equity holder, and flow through taxation of both income and losses

C Corporation
general partnership
joint venture
limited venture
real estate investment trust
S corporation
sole proprietorship
syndicate

all cash flows and the income tax consequences (including tax losses) of real estate ownership "flow through" directly to the individuals tax return in a :

real estate investment trust
limited partnership
sole proprietorship
c corporation

The C corporation

Must file articles of incorporation in the state in which it is formed
must hold board meeting and receive shareholders approval for major corporate decisions
must pay income taxes on its earnings prior to distribution to its shareholders
all of the above

an advantage of the S corporation is that:

tax losses flow through to the investors while liability is limited
tax losses can be claimed at both the corporate adn individual level
tax losses can flow through to the investors and investment liquidity is maximized; however, liability is not limited as in a C corporation
the investment is very liquid; but, tax losses cannot be claimed until the stock is sold

A major disadvantage of a general partnership is that:

the partners liabilty is not limited
the earnings of each general partner are subject to passive loss restrictions, even if they materially participate in the management of the corporation
both a and b
neither a nor b

in a general partnership

Income is taxed at both entry and investor level
the personal assets of the general partners are protected from legal actions against the partnership
both a and b
neither a nor b

6 which is not a characteristic of a limited partnership?

it must have at least one general and one limited partner
the general partner in a limited partnership assume unlimited risk
limited partner in a limited partnership are exposed to no risk
tax losses may be used by the limited partners to offset other passive income.

shareholders in real estate investment trusts recieve the same liability exposure as:

sole proprietors
shareholders in C corporations
general partners in a limited partnership
partners in a general partnership

funde for operations FFO is defined as:

gross income less vacancy and collection losses
effective gross income less operating expenses
net income
net income plus depreciation and the amortization of leasing expenses and tenant improvements

Which of the following is a required characheristic of a real estate trust

at least 95% or the REIT's total asset value must consist of real estate assets, cash and government securities
both a and b
neither a nor b

major providers of equity capital for real estate in the private market are:

pension funds
commingled real estate funds
life insurance
all of the above

one major disadvantage of owning real estate as a sole proprietorship is that the tax considerations and filing requirements are expensive

the c corporation form of ownership is the most widely used ownership form of firms whose primary business activity is to invest in income-producing real estate

a major drawback of s corporations for some investor groups is that they must not have more than 75 shareholders

general partners in a partnership are liable for all the debts of the partnership including those that may have been incurred by another partner

a limited partnership must have at least one general partner and 35 limited partners

A REIt raised capital for the purchase of property through the sale of its stock, borrowed funds, and substantially from the retained earnings from its activities, similar to the corporation

with respect to taxable, limited liabilty corporations LLC's are similar to general and limited partnerships

a syndicate is defined as a group of persons or legal entities who come together to carry out a paticular activity

a fully specified fund offered by a syndicator is a real estate mutual fund which invest in real estate corporations adn REIT's

REIT's that invest significant percentage of their assets in both properties and mortgages are termed commingled REITs

what are 3 benefits to a corporation involved in a sales and lease back division?

what are three benefits to and investor involved in a sales and lease back

real estate managment that oversee the day to day opperation of real property, such as rent collection, physical maintenacne, and tenant relations are:


portfolio managers
asset managers
fund managers
property managers

real estate managers that advise owners of investments portfolios about the kindsa of investments needed to fulfill the overall objectives for risk and return are:

portfolio managers
asset managers
fund managers
property managers

the promotion and marketing of space to neighboring users is termed:

image marketing
concentric marketing
shift-share marketing
footprint marketing

the development of a recognizable logo which ties all advertising and promotional material together is an examples of what the text calls:

imageering
unified marketing
concentric marketing
thematic image marketing

according to the text, some experts belief that --------of those who sign leases do so because they received favorable impression when viewing the property

20
50
75
90%

the primary guideline for evaluating the quality of prospective tenants include examining:

a tenants creditworthiness
a tenants compatability with existing tenants
a tenants permanence capital
all of the above

the value of the leased fee estate is equal to:

the value of the leasehold estate minus the value of the fee simple estate
the valuse of the fee simple estate minus the value of the leasehold estate
the present value of the marker rent less the contract rent for the term of the lease
the present value of the contract rent less the market rent for the term of the lease

a lease type that generally runs longest terms 20-90 years and calls for absolutely net rental payments is:

shopping center lease
office lease
apartment least
ground lease

assume a property is lease at market rent for 2 years. The first year the tenant is required to make payments of $550 at the beginning of each month. The second year the payment are stepped up to 750 each month. Determine the value of the lease-fee position if the market requires a 10% return on similar properties.

13,978
14,095
15,600
17,160

in a triple-net lease:

the tenant pays the real estate tax, maintenance, and insurance
the landlord pays the real estate taxes, maintenance, and insurance
the tenant pays the real estate taxes, utilities, and maintenance but not insurance.

on retail leases, rent is often paid as a percentage of the gross sales receipts over some predetermined sales amount, this rent is termed base rent

sometimes commercial lease rentals are tied to an index, usually the consumers price index.

in a net-net lease, the first "net" provision usually obligates lessees to pay property taxes, while the second 'net" obligated the landlord to pay insurance premiums

lesses never pay all operating expenses, such as repair and maintenance, because the landlords can increase their rents by minimizing these expenses

a benefit to a corporation participating in a sale-and leaseback deal includes receiving low cost funds to invest in their main-line business project

an example of a contract provision which limits the lessors exposure to unanticipated expenses is an expense stop

it is against the law in most states to grant the landlord a right of entry in an apartment lease

a sublet of a lease involves the sale of part of the lessees rights where the original lessees become lessors and the parties have a sandwich lease

a valid and enforceable lease does not need to contain a description of the property

property management contracts establish a fiduciary relationship between owner and the manager

real estate is a ______ market?

what are two economic principles that have a significant influence on the determination of land uses within a metropolitan area?

perfect competitive asset markets include all of the following characteristics, except?

perfect knowledge
many buyers and sellers
product homogeneity
highly regulated

A market in which investors do not use information about previous transactions and other publicly available information is termed a :

inefficent market
efficient market
perfect market
oligopolistic market

early economists argued that good access creates value becasue it results in:

more intensive use of facility
lower transportation cost
more intensive use of capital
more utility to the user

in determining where to locate, a firm considers the ability of the firm to substitute building improvements for:

financial capital
human capital
production materials
land

in urban area, the most desirable location are occupied by:

the most productive use
high-rise offices
retail space
high-rise apartments

transportation costs___ and the price of land____ with as the distance to an economic activity center of a city increases

increase increase
increase decrease
decrease increase
decrease decrease

what type of rent is generally recognized as the best measure of the true cost of occupied space?

contract rent
net contract rent
effective rent
stated rent

As discussed in the text, the Q statistic is defined as:

a property transaction price divided by its appraised value
a property investment value divided by its market value
a property replacement cost divided by its market value
a property market value divided by its replacement cost

during the past decades in the united states and in many other developed nations, the real estate asset market evolved into two markets: the traditional property market and the securitized market

deviations in transaction prices from the estimated market values supported by market fundamentals are often referred to as "noise"

A Q ratio greater than one indicated that the price of existing properties appear cheap relative to their replacement cost

expectations of variablity and embedded in the discount rate, which in turn affect asset prices.

What are 4 essential components of community-based nursing?

one explanation for the existence of boom-and bust periods (cycles) in real estate is that investors need substantial periods of time to accumulate and then to invest funds

rents reflect the price of space and sale prices reflect the value of assets and the right to collect rents

three key trends identified in the text that will affect commercial real estate markets are population growth, technology trends, and the changes anticipated int he ethnic composition of the population

a primary market factor affecting demand for office space is the number of developers in the market.

if the actual vacancy rate is 15% and the natural vacancy rate is 12 percent, the market is said to be somewhat underbuilt