CPM Financial Management

Question 1

What is 'Net Operating Income' (NOI) in real estate?

Accepted Answer

Effective gross income minus operating expenses before debt service

Answer

Gross potential rent minus vacancy

Answer

Net income after mortgage payments

Answer

Total revenue minus depreciation

Question 2

Which of the following is NOT typically included in operating expenses for a property?

Accepted Answer

Mortgage principal payments

Answer

Property insurance

Answer

Property taxes

Answer

Property management fees

Question 3

What is a 'capital expenditure' (CapEx) in property management?

Accepted Answer

Major improvements or replacements that extend the asset's useful life

Answer

Monthly utility payments

Answer

Recurring maintenance costs

Answer

Annual property tax payments

Question 4

Which ratio measures a property's ability to cover its debt payments from NOI?

Accepted Answer

Debt coverage ratio (DCR)

Answer

Cap rate

Answer

Gross rent multiplier

Answer

Cash-on-cash return

Question 5

Effective Gross Income (EGI) is calculated as:

Accepted Answer

Gross potential income minus vacancy and credit losses plus miscellaneous income

Answer

Net operating income plus operating expenses

Answer

Gross potential income plus capital expenditures

Answer

Base rent times number of units

Question 6

What is a 'cash-on-cash return'?

Accepted Answer

Annual pre-tax cash flow divided by total equity invested

Answer

The ratio of NOI to property value

Answer

The internal rate of return over the hold period

Answer

Gross rent divided by purchase price