CCS Financial Analysis for Properties 2

Question 1

A condominium association's reserve study shows a funding level of 42%. What does this percentage indicate?

Accepted Answer

The association has funded 42% of anticipated future repair costs

Answer

Reserve funding percentage reflects how much of anticipated long-term repair and replacement costs the association has currently saved.

Question 2

Which depreciation method allocates an equal expense amount each year over the asset's useful life?

Accepted Answer

Straight-line depreciation

Answer

Straight-line depreciation divides the asset's depreciable cost evenly across each year of its estimated useful life.

Question 3

When underwriting a condominium loan, lenders typically require that owner-occupancy rates meet a minimum threshold primarily to:

Accepted Answer

Mitigate risk of investor-dominated associations with higher default rates

Answer

High investor concentration increases default risk, so lenders set owner-occupancy minimums—commonly 50–51%—to qualify for conforming financing.

Question 4

A condominium's net operating income (NOI) is $180,000 and comparable properties trade at a 6% cap rate. What is the estimated property value?

Accepted Answer

$3,000,000

Answer

Value = NOI / Cap Rate = $180,000 / 0.06 = $3,000,000.

Question 5

An association that uses cash-basis accounting records revenues when:

Accepted Answer

Cash is actually received

Answer

Under cash-basis accounting, revenue is recognized only when payment is physically received, not when it is earned or billed.

(CCS) Certified Condominium Specialist Practice Test