BOMA Asset Management & Property Valuation 3

Question 1

Performance benchmarking in commercial real estate asset management is primarily used to:

Accepted Answer

Compare a property's financial and operational metrics against industry peers and market standards

Answer

Benchmarking allows asset managers to objectively evaluate whether a property is achieving competitive NOI, occupancy, and expense ratios relative to comparable assets in the same market.

Question 2

Cash-on-cash return is calculated by dividing:

Accepted Answer

Annual pre-tax cash flow by the total equity (cash) invested in the property

Answer

Cash-on-cash return measures the actual cash income earned on the cash invested, calculated as annual pre-tax cash flow divided by the down payment or equity contribution.

Question 3

Which of the following is EXCLUDED from operating expenses when calculating Net Operating Income (NOI)?

Accepted Answer

Debt service — principal and interest payments on a mortgage

Answer

NOI is calculated before financing costs; debt service reflects how the asset is financed, not how it operates, so it is excluded to allow comparison across properties with different capital structures.

Question 4

The cost approach to property valuation is most applicable when:

Accepted Answer

Appraising special-use properties where comparable market sales data is scarce

Answer

The cost approach estimates value as land value plus depreciated replacement cost of improvements, making it most useful for properties like schools, hospitals, or government buildings where sales data is limited.

Question 5

Persistently elevated vacancy rates in a commercial office building most likely indicate:

Accepted Answer

Underlying issues with pricing, location, building quality, or management that require corrective action

Answer

High vacancy typically signals that the property is failing to compete effectively on rent, amenities, location, or condition, requiring asset management intervention to improve its competitive position.

BOMA - Building Owners & Managers Association Practice Test

BOMA - Building Owners & Managers Association Practice Test

BOMA Asset Management & Property Valuation 3