CMPS Investor Return on Investment 2

Question 1

An investor purchases a rental property for $300,000 with $60,000 down. Annual NOI is $24,000. What is the cash-on-cash return?

Accepted Answer

8%

Answer

40%

Answer

6%

Answer

12%

Question 2

Which metric best measures a property's profitability independent of financing?

Accepted Answer

Capitalization rate

Answer

Cash-on-cash return

Answer

Debt service coverage ratio

Answer

Loan-to-value ratio

Question 3

A property's NOI increases from $20,000 to $22,000 while the cap rate remains at 8%. What happens to the property value?

Accepted Answer

Increases by $25,000

Answer

Decreases by $25,000

Answer

Stays the same

Answer

Increases by $2,000

Question 4

What does a Debt Service Coverage Ratio (DSCR) of 1.0 indicate?

Accepted Answer

NOI exactly covers annual debt service with no surplus

Answer

The property generates twice the income needed to cover debt

Answer

The loan is fully amortized

Answer

LTV equals 100%

Question 5

An investor's equity grows from $80,000 to $112,000 over three years. What is the approximate annualized return on equity?

Accepted Answer

11.9%

Answer

13.3%

Answer

40%

Answer

8%

Question 6

Which of the following would DECREASE an investor's total return on a rental property?

Accepted Answer

Increased vacancy rates

Answer

Rising market rents

Answer

Higher property appreciation

Answer

Lower interest rates on refinancing

Question 7

A mortgage planner recommends a 15-year loan over a 30-year loan to an investor. The primary ROI benefit is:

Accepted Answer

Faster equity buildup reducing interest cost over time

Answer

Lower monthly payments freeing up cash flow

Answer

Higher initial LTV

Answer

Increased tax deductions from more interest paid