CMPS Real Estate Investment Planning 4

Question 1

A value-add real estate strategy typically involves:

Accepted Answer

Acquiring underperforming properties and increasing NOI through improvements or better management

Answer

Value-add investing targets properties with below-market performance where operational improvements or renovations can increase NOI and value.

Question 2

Under IRS passive activity rules, rental real estate losses can offset ordinary income up to $25,000 per year only if the taxpayer:

Accepted Answer

Actively participates and has MAGI below $100,000

Answer

The $25,000 rental loss allowance phases out between $100,000 and $150,000 MAGI and requires active participation.

Question 3

A property is purchased for $400,000 and sold 5 years later for $520,000. Ignoring depreciation recapture, the long-term capital gain is:

Accepted Answer

$120,000

Answer

Long-term capital gain = Sale Price − Purchase Price = $520,000 − $400,000 = $120,000.

Question 4

Which type of NNN lease structure makes the tenant responsible for property taxes, insurance, AND maintenance expenses?

Accepted Answer

Triple net (NNN) lease

Answer

A triple net lease passes all three expense categories—taxes, insurance, and maintenance—to the tenant, reducing landlord operating risk.

Question 5

An investor financing a multi-family property wants to minimize the impact of rising interest rates on long-term cash flow. The best strategy is to:

Accepted Answer

Lock in a long-term fixed-rate mortgage at current rates

Answer

A long-term fixed-rate mortgage eliminates interest rate risk by locking in the payment for the life of the loan.

(CMPS) Certified Mortgage Planning Specialist Practice Test