CRM Financial Analysis for Properties 3

Question 1

A 20-unit apartment building has a gross rent multiplier (GRM) of 8 and monthly rents of $1,200 per unit. What is the estimated property value?

Accepted Answer

$2,304,000

Answer

Annual gross rent = 20 × $1,200 × 12 = $288,000; Value = GRM × Annual Gross Rent = 8 × $288,000 = $2,304,000.

Question 2

Which operating expense category is typically NOT included when calculating NOI?

Accepted Answer

Mortgage principal and interest payments

Answer

NOI is calculated before debt service; mortgage payments are below-the-line items not included in operating expenses for NOI.

Question 3

A capital expenditure reserve study recommends setting aside $400 per unit per year for a 50-unit property. What annual reserve contribution is needed?

Accepted Answer

$20,000

Answer

Annual reserve = $400 per unit × 50 units = $20,000.

Question 4

What is the primary purpose of a variance report in property financial management?

Accepted Answer

To compare actual income and expenses against the budget

Answer

A variance report identifies differences between budgeted and actual financial performance, enabling corrective action.

Question 5

An investor purchases a property for $500,000 with $100,000 down. The annual after-tax cash flow is $12,000. What is the cash-on-cash return?

Accepted Answer

12%

Answer

Cash-on-cash return = Annual After-Tax Cash Flow ÷ Equity Invested = $12,000 ÷ $100,000 = 12%.

(CRM) Certified Residential Manager Practice Test

(CRM) Certified Residential Manager Practice Test

CRM Financial Analysis for Properties 3