Practice Test Geeks(REA) Real Estate Analyst Certification Practice Test
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Real Estate Financing & Capital Markets Flashcards

6 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 6 Real Estate Financing & Capital Markets flashcards as text

  1. What is a 'debt service coverage ratio' (DSCR) and why do lenders use it?

    Answer: NOI divided by annual debt service; measures a property's ability to cover mortgage payments

    DSCR (NOI ÷ annual debt service) measures how many times a property's income covers its debt payments, with lenders typically requiring a minimum of 1.20–1.25x.

  2. What distinguishes a 'recourse' loan from a 'non-recourse' loan in commercial real estate?

    Answer: Recourse loans allow the lender to pursue the borrower's personal assets if the property value is insufficient; non-recourse loans limit recovery to the collateral

    With recourse debt, lenders can pursue the sponsor's assets beyond the collateral; non-recourse loans limit lender recovery to the property itself.

  3. What is 'mezzanine financing' in real estate capital structure?

    Answer: Subordinate debt secured by a pledge of equity interests, sitting between senior debt and equity

    Mezzanine debt is secured by a pledge of the borrower's equity in the property-owning entity and carries higher interest rates than senior debt due to its subordinate position.

  4. A commercial real estate loan has an LTV of 65% and DSCR of 1.30x. What does this tell an analyst?

    Answer: The loan is conservatively structured with low leverage and income well above debt service

    A 65% LTV means significant equity cushion, and a 1.30x DSCR confirms income comfortably exceeds debt payments — both indicators of conservative underwriting.

  5. What is a 'CMBS loan' and what is its primary advantage for borrowers?

    Answer: A commercial mortgage-backed securities loan pooled and sold to bond investors, offering competitive fixed rates

    CMBS loans are originated, pooled, and securitized into bonds sold to investors, providing competitive fixed rates and long-term non-recourse financing.

  6. What is 'yield maintenance' in the context of commercial real estate loan prepayment?

    Answer: A prepayment penalty that compensates the lender for lost interest by making them whole relative to Treasury yields

    Yield maintenance requires the borrower to pay a premium equal to the present value of remaining interest payments discounted at Treasury rates, ensuring the lender receives the expected yield.