CRECI Investment Analysis and Portfolio Strategy

Question 1

Which metric measures the annual return on a commercial property relative to its purchase price, excluding financing?

Accepted Answer

Capitalization rate

Answer

Cash-on-cash return

Answer

Internal rate of return

Answer

Debt service coverage ratio

Question 2

An investor purchases a property for $2,000,000 with an NOI of $140,000. What is the cap rate?

Accepted Answer

7.0%

Answer

5.0%

Answer

6.0%

Answer

8.0%

Question 3

What does a Debt Service Coverage Ratio (DSCR) of 1.25 indicate?

Accepted Answer

The property generates 25% more income than required to cover debt

Answer

The property generates 25% less income than debt payments

Answer

The loan-to-value ratio is 125%

Answer

The vacancy rate is 25%

Question 4

Which investment strategy involves purchasing underperforming or vacant commercial properties to reposition and increase their value?

Accepted Answer

Value-add strategy

Answer

Core strategy

Answer

Core-plus strategy

Answer

Opportunistic strategy

Question 5

In commercial real estate portfolio diversification, which type of diversification involves investing across office, retail, industrial, and multifamily properties?

Accepted Answer

Property type diversification

Answer

Geographic diversification

Answer

Tenant credit diversification

Answer

Vintage year diversification

Question 6

What is the primary purpose of a sensitivity analysis in commercial real estate investment underwriting?

Accepted Answer

To assess how changes in key assumptions affect investment returns

Answer

To determine the optimal lease structure

Answer

To calculate depreciation schedules

Answer

To evaluate tenant creditworthiness

Question 7

Which measure represents the discount rate at which the net present value of all cash flows from a commercial real estate investment equals zero?

Accepted Answer

Internal rate of return

Answer

Equity dividend rate

Answer

Capitalization rate

Answer

Gross rent multiplier