CMPS Real Estate Investment Planning 2

Question 1

An investor purchases a rental property for $350,000 with a $70,000 down payment. The annual NOI is $28,000. What is the cap rate?

Accepted Answer

8.0%

Answer

6.0%

Answer

10.0%

Answer

7.5%

Question 2

Which depreciation schedule does the IRS require residential rental property to use?

Accepted Answer

27.5-year straight-line

Answer

39-year straight-line

Answer

15-year MACRS

Answer

20-year straight-line

Question 3

A property with a gross potential rent of $60,000, vacancy loss of $3,000, and operating expenses of $22,000 has a NOI of:

Accepted Answer

$35,000

Answer

$38,000

Answer

$57,000

Answer

$60,000

Question 4

Which of the following best describes a 1031 exchange in real estate investing?

Accepted Answer

Deferral of capital gains tax by reinvesting proceeds into a like-kind property

Answer

A tax-free sale of a primary residence

Answer

An exchange of mortgage notes between two lenders

Answer

A method to convert rental income to capital gains

Question 5

An investor's property generates $18,000 annual cash flow on a $150,000 equity investment. What is the cash-on-cash return?

Accepted Answer

12%

Answer

8%

Answer

15%

Answer

10%

Question 6

Which ratio measures a property's ability to cover its mortgage payments from operating income?

Accepted Answer

Debt Service Coverage Ratio (DSCR)

Answer

Loan-to-Value Ratio (LTV)

Answer

Gross Rent Multiplier (GRM)

Answer

Capitalization Rate

Question 7

Which type of real estate investment structure provides pass-through taxation and limited liability to its investors?

Accepted Answer

Limited Liability Company (LLC)

Answer

C-Corporation

Answer

S-Corporation (single class of stock)

Answer

General Partnership