Practice Test Geeks(CMPS) Certified Mortgage Planning Specialist Practice Test
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Real Estate Investment Planning Flashcards

7 cards from real CMPS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Real Estate Investment Planning flashcards as text

  1. A real estate investor uses a Gross Rent Multiplier (GRM) of 10 and the subject property's gross annual rent is $48,000. The estimated property value is:

    Answer: $480,000

    Estimated Value = GRM × Gross Annual Rent = 10 × $48,000 = $480,000.

  2. Which due diligence item specifically examines whether tenants have the right to buy the property before it is offered to outside buyers?

    Answer: Right of first refusal clause review

    A right of first refusal gives existing tenants the contractual priority to purchase the property before outside buyers can make an offer.

  3. An investor's 10-unit apartment building has an asking price of $1,200,000 and NOI of $72,000. A competing property trades at a 7% cap rate. Is the asking price reasonable?

    Answer: No, it is overpriced; the market-implied value is $1,028,571

    Market-implied value at 7% cap rate = $72,000 / 0.07 = $1,028,571, which is below the $1,200,000 ask, indicating overpricing.

  4. Which exit strategy allows an investor to defer taxes while converting a property into an annuity-like income stream?

    Answer: Installment sale

    An installment sale spreads capital gains recognition over multiple years as payments are received, deferring the tax liability.

  5. A CMPS advising a real estate investor on leverage should caution that higher LTV increases:

    Answer: Both financial risk and required cash flow to service debt

    Higher leverage means greater debt service obligations and amplified losses if property values decline or vacancies rise.

  6. Which analysis tool projects property-level cash flows, equity buildup, and ultimate sale proceeds across a defined holding period?

    Answer: Discounted Cash Flow (DCF) model

    A DCF model discounts all projected future cash flows and the reversion (sale) to present value to determine investment value and IRR.

  7. When advising a client on purchasing investment real estate, a CMPS should first help the client establish:

    Answer: Clear investment goals, risk tolerance, and target holding period

    Identifying objectives, risk tolerance, and holding period guides all subsequent financing, property selection, and exit strategy decisions.