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
What does a 'going-in' cap rate lower than a 'going-out' cap rate imply about investor expectations for the property?
Answer: Investors expect NOI to decline over the holding period
A lower going-in than going-out cap rate implies the investor paid a premium relative to exit, often reflecting expected NOI growth that doesn't fully materialize.
Which investment vehicle allows individual investors to participate in large commercial real estate portfolios and is traded on public stock exchanges?
Answer: Real Estate Investment Trust (REIT)
Publicly traded REITs are listed on stock exchanges, providing liquidity and allowing small investors access to institutional commercial real estate.
In commercial real estate, what is the 'equity multiple'?
Answer: The total cash returned to the investor divided by the total equity invested
The equity multiple equals total distributions plus net sale proceeds divided by total equity invested, showing absolute return independent of time.
Which due diligence item specifically evaluates whether a commercial property's existing leases are above or below current market rent levels?
Answer: Rent roll analysis
A rent roll analysis reviews each lease's term, rate, and expiration to compare in-place rents against market rents and assess rollover risk.
What is 'preferred return' in the context of a commercial real estate equity partnership?
Answer: A priority distribution to limited partners before the sponsor receives promote
A preferred return (e.g., 8%) ensures LPs receive a minimum return on invested capital before the GP/sponsor shares in profits via the promote.
Which strategy involves an investor acquiring a stabilized, well-leased commercial asset in a primary market with low risk and predictable returns?
Answer: Core strategy
The core strategy targets high-quality, fully leased properties in major markets, prioritizing capital preservation and stable income over appreciation.
What financial concept accounts for the fact that a dollar received today is worth more than a dollar received in the future when evaluating commercial real estate investments?
Answer: Time value of money
The time value of money underpins discounted cash flow analysis by recognizing that future cash flows must be discounted to reflect their present worth.