Practice Test Geeks(CRECI) Commercial Real Estate Certification Institute Practice Test
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Investment Analysis and Portfolio Strategy Flashcards

7 cards from real CRECI practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Investment Analysis and Portfolio Strategy flashcards as text

  1. A commercial property generates $300,000 in gross potential rent, has a 10% vacancy allowance, and $80,000 in operating expenses. What is the NOI?

    Answer: $190,000

    $300,000 × 0.90 = $270,000 effective gross income; $270,000 − $80,000 = $190,000 NOI.

  2. Which term describes the ratio of a property's annual gross rents to its purchase price, used as a quick valuation shortcut?

    Answer: Gross rent multiplier

    The GRM equals purchase price divided by annual gross rents and provides a simple comparison across similar properties.

  3. In a discounted cash flow analysis, what does the 'reversion value' represent?

    Answer: The projected sales proceeds at the end of the holding period

    The reversion value (or terminal value) is the estimated net proceeds from selling the property at the end of the projection period.

  4. An investor expects to sell a commercial property in Year 5 at an exit cap rate of 7.5% when Year 6 NOI is projected at $225,000. What is the estimated terminal value?

    Answer: $3,000,000

    $225,000 / 0.075 = $3,000,000 terminal value using the going-out cap rate applied to next year's NOI.

  5. Which portfolio risk concept refers to the risk inherent to the overall commercial real estate market that cannot be eliminated through diversification?

    Answer: Systematic risk

    Systematic (market) risk affects all properties and cannot be diversified away, unlike property-specific idiosyncratic risk.

  6. What is a common benchmark used by institutional investors to evaluate commercial real estate investment performance in the United States?

    Answer: NCREIF Property Index (NPI)

    The NCREIF Property Index tracks unleveraged returns of institutional-grade commercial properties held by pension funds and advisors.

  7. Which approach to commercial real estate valuation is most commonly used for income-producing properties and relies on projected cash flows?

    Answer: Income capitalization approach

    The income capitalization approach values a property based on its ability to generate future income, making it most applicable to investment properties.