CMPS Real Estate Investment Planning 3

Question 1

A real estate investor comparing two markets focuses on population growth, job creation, and rental demand. These are examples of:

Accepted Answer

Market fundamentals

Answer

Population growth, employment trends, and rental demand are core market fundamentals used in real estate investment analysis.

Question 2

An investor buys a property at a 5% cap rate in a market where comparable properties trade at a 6% cap rate. This suggests the investor:

Accepted Answer

Overpaid relative to market

Answer

Buying at a lower cap rate than market implies paying a premium because a lower cap rate means a higher price for the same income.

Question 3

Which risk describes the possibility that a real estate investor cannot sell a property quickly at fair market value?

Accepted Answer

Liquidity risk

Answer

Liquidity risk is the danger that real estate cannot be quickly converted to cash without a significant price concession.

Question 4

In a mortgage planning context, which loan feature most benefits a real estate investor holding a property for only 5 years?

Accepted Answer

5/1 ARM with lower initial rate

Answer

A 5/1 ARM offers a lower rate for the initial fixed period matching the holding period, minimizing carry cost before the planned sale.

Question 5

Which of the following is a characteristic of commercial real estate loans compared to residential investment loans?

Accepted Answer

Underwriting is primarily based on property income rather than borrower income

Answer

Commercial loans are underwritten primarily on the property's NOI and DSCR rather than the borrower's personal income.

(CMPS) Certified Mortgage Planning Specialist Practice Test