Practice Test Geeks(REA) Real Estate Analyst Certification Practice Test
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Financial Modeling & Investment Analysis Flashcards

7 cards from real REA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Financial Modeling & Investment Analysis flashcards as text

  1. A lender requires a minimum debt service coverage ratio (DSCR) of 1.25x. If annual debt service is $400,000, what minimum NOI must the property generate?

    Answer: $500,000

    Minimum NOI = DSCR × Debt Service = 1.25 × $400,000 = $500,000.

  2. What is the primary advantage of using unlevered free cash flow (UFCF) when valuing a real estate asset?

    Answer: It removes financing effects, enabling comparison across different capital structures

    UFCF strips out financing to give an asset-level view, making it comparable across deals with different debt structures.

  3. In a commercial real estate DCF model, the terminal value is most often calculated using which method?

    Answer: Applying an exit cap rate to the final year's NOI

    The most common real estate terminal value approach divides the projected terminal NOI by a reversion (exit) cap rate.

  4. An analyst increases the assumed rent growth rate in a DCF from 2% to 3%. All else equal, this change most directly increases:

    Answer: Both NOI projections and the terminal value

    Higher rent growth raises NOI in every projection year and inflates the terminal NOI used to compute the reversion value.

  5. Which ratio measures how many years of gross rental income are required to pay the purchase price?

    Answer: Gross rent multiplier (GRM)

    GRM = Purchase Price / Gross Rental Income, expressing the price as a multiple of annual gross rents.

  6. In a promote waterfall with a 1.5x equity multiple hurdle followed by an 8% IRR hurdle, distributions are made to LPs first. Which scenario triggers the 8% IRR tier before the 1.5x tier?

    Answer: A long hold with back-loaded cash flows

    A long hold with back-loaded cash flows can satisfy a 1.5x equity multiple without achieving an 8% IRR, making the IRR hurdle the binding constraint.

  7. When stress-testing a multifamily acquisition model, which combination of inputs creates the most adverse downside scenario?

    Answer: High vacancy, negative rent growth, high exit cap rate

    High vacancy and negative rent growth crush NOI while a high exit cap rate compresses the reversion value, maximizing downside across all value drivers.