CPM Asset Management and Investment Analysis 2

Question 1

What is the primary difference between an asset manager and a property manager in real estate?

Accepted Answer

Asset managers focus on investment strategy and maximizing owner returns while property managers handle daily operations

Answer

Asset managers focus on maximizing the long-term value and return on the real estate investment, while property managers handle the day-to-day operational aspects of running the property.

Question 2

Which financial statement shows a property's revenues and expenses over a specific period of time?

Accepted Answer

Income and expense statement (operating statement)

Answer

The income and expense statement (operating statement) reports all revenues and expenses over a specific accounting period, showing the property's profitability.

Question 3

When performing a property analysis, what does the term 'equity dividend rate' (also called cash-on-cash return) measure?

Accepted Answer

The before-tax cash flow as a percentage of the initial equity invested

Answer

The equity dividend rate (cash-on-cash return) measures before-tax cash flow as a percentage of the equity (cash) initially invested, reflecting the immediate yield on the investor's down payment.

Question 4

A property has a gross potential income of $600,000, vacancy and credit loss of $30,000, and operating expenses of $200,000. What is the NOI?

Accepted Answer

$370,000

Answer

Effective Gross Income = $600,000 - $30,000 = $570,000; NOI = $570,000 - $200,000 = $370,000.

Question 5

Which of the following best describes the 'highest and best use' concept in real estate asset management?

Accepted Answer

The legally permissible, physically possible, financially feasible, and maximally productive use of a property

Answer

Highest and best use is the legally permissible, physically possible, financially feasible, and maximally productive use that results in the highest property value.

CPM - Certified Property Manager Practice Test

CPM - Certified Property Manager Practice Test

CPM Asset Management and Investment Analysis 2