CRECI Investment Analysis and Portfolio Strategy 2

Question 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?

Accepted Answer

$190,000

Answer

$220,000

Answer

$250,000

Answer

$270,000

Question 2

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

Accepted Answer

Gross rent multiplier

Answer

Cap rate

Answer

Cash-on-cash return

Answer

Equity yield rate

Question 3

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

Accepted Answer

The projected sales proceeds at the end of the holding period

Answer

The original purchase price of the property

Answer

The cumulative depreciation taken during ownership

Answer

The outstanding loan balance at disposition

Question 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?

Accepted Answer

$3,000,000

Answer

$2,700,000

Answer

$3,375,000

Answer

$3,750,000

Question 5

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

Accepted Answer

Systematic risk

Answer

Idiosyncratic risk

Answer

Liquidity risk

Answer

Leasing risk

Question 6

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

Accepted Answer

NCREIF Property Index (NPI)

Answer

S&P 500 Index

Answer

Dow Jones REIT Index

Answer

Bloomberg Barclays Aggregate Bond Index

Question 7

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

Accepted Answer

Income capitalization approach

Answer

Sales comparison approach

Answer

Cost approach

Answer

Assessed value approach