Real Estate Finance & Mortgages Flashcards
7 cards from real CRLS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Real Estate Finance & Mortgages flashcards as text
Which formula correctly defines Net Operating Income (NOI) for a rental property?
Answer: Effective gross income minus operating expenses
NOI is effective gross income less operating expenses, before debt service, depreciation, and income taxes.
An apartment building produces NOI of $60,000 and is valued at $800,000. What is its capitalization rate?
Answer: 7.5%
Cap rate = NOI / value = $60,000 / $800,000 = 7.5%.
A property has NOI of $120,000 and annual debt service of $100,000. What is the debt service coverage ratio (DSCR)?
Answer: 1.20
DSCR = NOI / annual debt service = $120,000 / $100,000 = 1.20.
An investor borrows $240,000 to buy a rental home appraised at $300,000. What is the loan-to-value ratio?
Answer: 80%
LTV = loan / value = $240,000 / $300,000 = 80%.
A fourplex sells for $1,200,000 and generates $120,000 in gross annual rent. What is the gross rent multiplier (GRM)?
Answer: 10
Annual GRM = price / gross annual rent = $1,200,000 / $120,000 = 10.
What is the primary purpose of a mortgage escrow (impound) account?
Answer: To collect funds for property taxes and hazard insurance
Lenders collect monthly escrow amounts to pay property taxes and insurance when due, protecting their collateral.
In investment analysis, 'debt service' refers to which of the following?
Answer: Total principal and interest payments on the loan
Debt service is the total of principal and interest paid on a loan over a period.
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