Real Estate Investing Market Analysis and Feasibility 3

Question 1

Which economic indicator is most directly linked to demand for residential real estate?

Accepted Answer

Employment growth and job creation

Answer

Employment growth drives residential demand because jobs give people the income and confidence to purchase or rent homes.

Question 2

What is a 'comparative market analysis' (CMA) primarily used for?

Accepted Answer

Estimating a property's market value based on recent comparable sales

Answer

A CMA estimates a property's value by comparing it to recently sold similar properties in the same area.

Question 3

An investor evaluating a secondary market should pay particular attention to which factor that differs from primary markets?

Accepted Answer

Lower liquidity and longer days on market during downturns

Answer

Secondary markets typically have smaller buyer pools, so properties take longer to sell and liquidity risk is higher during economic downturns.

Question 4

What does a declining population trend in a target market most directly threaten for a rental investor?

Accepted Answer

Decreased rental demand and potential rent deflation

Answer

A shrinking population reduces the pool of potential renters, increasing vacancy rates and putting downward pressure on achievable rents.

Question 5

In real estate market analysis, 'barriers to entry' for new supply most commonly refer to:

Accepted Answer

Zoning restrictions, permitting delays, and construction costs that limit new development

Answer

Barriers to new supply include zoning laws, long permitting processes, high construction costs, and limited land, which protect existing landlords from competition.

Real Estate Investing Practice Test

Real Estate Investing Practice Test

Real Estate Investing Market Analysis and Feasibility 3