Real Estate Portfolio Management
Exam Bank
Course Introduction
Real Estate Portfolio Management provides students with the analytical frameworks and practical skills necessary to effectively manage collections of real estate assets. The course explores key concepts such as asset allocation, risk management, portfolio diversification, and performance measurement within real estate markets. It covers approaches to portfolio construction, the role of real estate in mixed-asset investment strategies, and the integration of financial modeling techniques. Students will also examine the impact of market cycles, economic trends, and sustainability considerations on real estate portfolios, preparing them to make informed strategic decisions in both private and public real estate investment contexts.
Recommended Textbook
Real Estate Finance and Investments 13th Edition by William Brueggeman
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537 Verified Questions
537 Flashcards
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Chapter 1: Real Estate Investment: Basic Legal Concepts
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Sample Questions
Q1) Which type of deed offers the grantee the most protection?
A) Quitclaim deed
B) Special warranty deed
C) General warranty deed
D) Officer's deed
Answer: C
Q2) After a house is purchased,contractors cannot ask the new owner of the house to pay any bills that were outstanding before the house was sold.
A)True
B)False
Answer: False
Q3) As compared to other types of deeds,a general warranty deed provides the most comprehensive warranties about the quality of the title to the property.
A)True
B)False
Answer: True
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Chapter 2: Real Estate Financing: Notes and Mortgages
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Sample Questions
Q1) A property is encumbered as follows: First mortgage,A $250,000
Second mortgage,B $40,000
Third mortgage,C $10,000
How much can mortgagee B pay for the property at a foreclosure sale without having to raise additional funds?
A) $290,000
B) $40,000
C) $300,000
D) $50,000
Answer: A
Q2) When a deed is given in lieu of foreclosure of the mortgage,the mortgagor no longer has an obligation to pay the mortgage note.
A)True
B)False
Answer: True
Q3) A fee simple estates is a type of freehold estate.
A)True
B)False
Answer: True
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Chapter 3: Mortgage Loan Foundations: The Time Value of Money
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Sample Questions
Q1) If an investment earns 12% annually,
A) an equivalent monthly investment would have to earn a higher equivalent nominal rate to yield the same return.
B) an equivalent monthly investment would have to earn a lower equivalent nominal rate to yield the same return.
C) an equivalent monthly investment would have to earn the same equivalent nominal rate to yield the same return.
D) a relation cannot be determined between a monthly and annual investment.
Answer: B
Q2) Begin with a single sum of money at period 0.First,calculate a future value of that sum at 12.01%.Then discount that future value back to period 0 at 11.99%.In relation to the initial single sum,the discounted future value:
A) is greater than the original amount.
B) is less than the original amount.
C) is the same as the original amount.
D) cannot be determined with the information given.
Answer: A
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Chapter 4: Fixed Interest Rate Mortgage Loans
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Sample Questions
Q1) Origination fees are tax deductible as an interest expense.
A)True
B)False
Q2) Truth-in-lending requires the borrower to tell the truth on the loan application.
A)True
B)False
Q3) Inflation makes very little difference to lenders of and investors needing money.
A)True
B)False
Q4) Prepayment penalties increase the lender's mortgage yield and discount points decrease it.
A)True
B)False
Q5) Determining a loan balance on a CPM is a simple future value of an annuity problem.
A)True
B)False
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Chapter 5: Adjustable and Floating Rate Mortgage Loans
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Sample Questions
Q1) Given that every other factor is equal,which of the following ARM will have lowest expected cost?
A) ARM with payment caps and negative amortization.
B) ARM with interest rate caps.
C) ARM with longer Adjustment interval.
D) ARM with no caps or limitations.
Q2) Which loan should have the lowest initial interest rate?
A) Loan 1
B) Loan 2
C) Loan 3
D) Loan 4
Q3) Which loan is a FRM?
A) Loan 1
B) Loan 2
C) Loan 3
D) Loan 4
Q4) Lender's can partially avoid estimating interest rates by tying an ARM to an interest rate index.
A)True
B)False
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Chapter 6: Mortgages: Additional Concepts, Analysis, and Applications
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Sample Questions
Q1) A borrower finds that the incremental cost of borrowing an extra $10,000 is 14%.The borrower can earn 12% on alternative investments of comparable risk so he would be better off by not borrowing the extra 14%.
A)True
B)False
Q2) Which of the following is TRUE concerning Wraparound Loans:
A) The borrower makes payments on existing loan
B) The lender makes payments on existing loan
C) The lender only makes payments on the second mortgage
D) The borrower only makes payments on the second mortgage
Q3) The Market Value of a loan is:
A) The loan balance times one minus the market rate
B) The loan balance times one minus the original rate
C) The future value of the remaining payments
D) The present value of the remaining payments
Q4) The cash equivalent value of a house that sold with favorable financing is usually less than its sale price.
A)True
B)False
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Chapter 7: Single-Family Housing: Pricing, Investment, and Tax Considerations
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Sample Questions
Q1) It is possible for two identical houses located in different school districts to sell for different prices.
A)True
B)False
Q2) Housing futures contracts allow investors to speculate on changes in home prices without actually owning a home.
A)True
B)False
Q3) When the value of public goods exceeds their cost,the effect on house prices is called the "capitalization effect"
A)True
B)False
Q4) Use of construction costs is very important in the sales comparison approach to valuation.
A)True
B)False
Q5) A housing bubble occurs when there is a big increase in the supply of homes.
A)True
B)False
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Chapter 8: Underwriting and Financing Residential Properties
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Sample Questions
Q1) FTL requires that the lender disclose an estimated cost of financing within three days of loan application.
A)True
B)False
Q2) Which of the following is the main objective of FTL legislation?
A) More effective advance disclosure of settlement costs
B) More informative disclosure of the cost of credit
C) Elimination of kickbacks and unearned fees
D) A reduction in the amount of escrow placed in accounts for homeowners
Q3) A typical RESPA closing statement has which of the following characteristics?
A) 2columns - Summary of borrower's and seller's transactions
B) 2columns - Summary of borrower's and broker's transactions
C) 3columns - Summary of borrower's,seller's,and broker's transactions.
D) 3columns - Summary of borrowers,seller's,and lender's transactions.
Q4) RESPA had three specific objectives.Which of the following was NOT one of those objectives?
A) More effective advance disclosure of settlement costs.
B) More informative of the cost of credit.
C) Elimination of kickbacks and unearned fees.
D) A reduction in the amount of escrow placed in accounts for homeowners.
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Chapter
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Sample Questions
Q1) A gross lease is riskier for the lessor than a net lease.
A)True
B)False
Q2) Which of the following is TRUE for a net lease?
A) All expenses are paid for by the owner
B) All expenses are paid for by the tenant
C) All expenses are paid by the lender
D) All expenses are paid by the investor
Q3) The difference between the existing stock of space and the equilibrium occupancy is know as the:
A) supply
B) demand
C) equilibrium
D) vacancy
Q4) If a lease has free rent earlier in its term,its default risk might be considered slightly higher.
A)True
B)False
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Chapter 10: Valuation of Income Properties: Appraisal and the Market for Capital
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Sample Questions
Q1) Appraisers use bracketing in order to estimate the upper and lower range of value.
A)True
B)False
Q2) What does an appraisal tell about the value of a property?
A) An appraisal calculates value
B) An appraisal confirms value
C) An appraisal estimates value
D) An appraisal determines value
Q3) Capitalization rate of newly constructed apartment building will be more than that of relatively old apartment building,which is comparable in all other aspects.
A)True
B)False
Q4) Which of the following factors is NOT part of the definition of market value?
A) Payment is made in terms of cash in U.S.dollars or a comparable financial arrangement
B) The property has been on the open market for less than a year
C) Buyer and seller are typically motivated
D) Price is not affected by special or creative financing
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Chapter 11: Investment Analysis and Taxation of Income Properties
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Sample Questions
Q1) A property that produces a level of NOI of $200,000 per year is expected to be sold in year 5 for $2,000,000.If the property was purchased for $2,000,000,what percent of the IRR can be attributed to the operating income only?
A) 10.0%
B) 90.0%
C) 37.9%
D) 63.1%
Q2) A property is sold for $5,100,000 with selling costs of 3% of the sales price.The mortgage balance at the time of sale is $3,600,000.The property was purchased 5 years ago for $4,820,000.Annual depreciation allowances of $153,016 have been taken.If the tax rate is 28%,what is the after-tax cash flow from sale of the property?
A) $1,184,062
B) $969,840
C) $1,347,000
D) $1,097,218
Q3) Expense stops protect the lessee from unexpected changes in market rents.
A)True B)False
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Chapter 12: Financial Leverage and Financing Alternatives
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Sample Questions
Q1) In an inflationary environment where property values are also rising,a participation loan may provide a lender with some protection against unanticipated inflation.
A)True
B)False
Q2) Which of the following is NOT a benefits of a Sale Leaseback of land for investors?
A) It is a way of effectively obtaining 100% financing
B) The lease payments are tax deductable
C) Land can not be depreciated for tax purposes
D) The land value may increase over the holding period.
Q3) Which of the following would NOT be considered an advantage that an investor might consider under a sale-leaseback of land?
A) The sale-leaseback in effect provides 100% financing on the land
B) Lease payment are tax deductible
C) The sale-leaseback provides the same depreciation deductibility with a smaller equity investment
D) The land may appreciate over the holding period
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Chapter 13: Risk Analysis
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Sample Questions
Q1) Risk due to potential tax law changes is referred to as:
A) Business risk
B) Financial risk
C) Legislative risk
D) Tax risk
Q2) Real estate has a lot of inflation risk.
A)True
B)False
Q3) Percentage rent is common in office building leases.
A)True
B)False
Q4) The term "due diligence" refers to doing an investigation before buying a property.
A)True
B)False
Q5) Examples of real options includes:
A) Valuation of vacant land
B) Valuation of projects with phases of development
C) Valuation of a building that can be renovated
D) All of the above
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Chapter 14: Disposition and Renovation of Income Properties
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Sample Questions
Q1) An investor purchased a building in 1982 when the building could be depreciated over 19 years.A new investor is interested in purchasing the building in 1992 when the depreciable life according to tax laws is 31.5 years.Assuming both investors are in the same tax bracket and that everything else is equal,what can be said about the after-tax cash flow received by the new investor as compared to the after-tax cash flow that would be received by the original owner of the building?
A) The new investor will have a higher after-tax cash flow because the depreciation expense will be lower
B) The new investor will have a higher after-tax cash flow because the depreciation expense will be higher
C) Both investors will have to use the 31.5 year depreciable life after 1986 so the after-tax cash flow will be equal
D) The new investor will have a lower after-tax cash flow because the depreciation expense will be lower
Q2) In general,equity buildup tends to lower the marginal rate of return of holding a property.
A)True B)False
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Chapter 15: Financing Corporate Real Estate
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Sample Questions
Q1) If a company's space requirements are far less than what is optimal to develop on a given site,leasing would tend to be more favorable.
A)True
B)False
Q2) Which of the following is FALSE,concerning operating leases?
A) It is recorded as present value of lease on the balance sheet.
B) It does not have any real effect the balance sheet.
C) It must not extend for at least 75 percent of the asset's life.
D) It is usually the preferred form of accounting for leases.
Q3) The cash flow to be considered in a lease versus own analysis are:
A) purchase price,difference in cash flow from operations over the holding period,cash flow from sale.
B) purchase price,lease payments,cash flow from future sale.
C) cash flow from sale,difference in future operating expenses,cash flow from future sale.
D) cash flow from sale,future lease payments,difference in future operating expenses.
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Chapter 16: Financing Project Development
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Sample Questions
Q1) Construction loans provide the money to construct a building and are usually provided by life insurance companies or pensions funds.
A)True
B)False
Q2) Besides an estimate of costs,a construction loan submission package includes many other components.Which of the following would NOT be one of those components?
A) Pro Forma Statement of Cash Flows for an investor's portfolio
B) Pro Forma Statement of Cash Flows
C) Pro Forma Operating Statement
D) Ratio and Sensitivity Analysis
Q3) Under a triparty buy-sell agreement,the construction lender will accept funding from the first party willing to repay the construction loan.
A)True
B)False
Q4) Permanent financing commitments usually allow the lender to approve major leases.
A)True
B)False
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Chapter 17: Financing Land Development Projects
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Sample Questions
Q1) Which of the following was not stated as contributing to the complication of estimating amount of interest carry?
A) The loan is drawn and interest is calculated on drawn amount.
B) Revenue from each type of site varies.
C) The rate of repayment of a loan depends on when the parcel is sold.
D) Development loan interest rates are usually fixed while market rates fluctuate.
Q2) Which of the following costs should NOT be included in a net present value analysis of a land development project?
A) Land purchase price
B) Property tax
C) General overhead such as personnel costs
D) Developer's profit
Q3) An analysis of whether land can be purchased and developed profitably is known as __________.
A) Financial Analysis
B) Feasibility Study
C) Turnkey Study
D) Project Profitability
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Chapter 18: Structuring Real Estate Investments:
Organizational Forms and Joint
Ventures
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Q1) Tax losses can not be allocated to partners in a syndication.
A)True
B)False
Q2) Syndications can take the form of corporations,limited partnership,or other organizational forms.
A)True
B)False
Q3) Joint ventures typically involve a large number of individual investors joining together to purchase real estate.
A)True
B)False
Q4) Capital accounts are debited for cash contributed to the partnership and credited for cash distributed to the partner.
A)True
B)False
Q5) A limited partnership limits the general partners' liability to the capital they originally invested.
A)True
B)False
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Chapter 19: The Secondary Mortgage Market: Pass-Through Securities
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Sample Questions
Q1) Marking the mortgage to market is the process of accumulating mortgage pools and marketing them to individual investors as mortgage-backed bonds.
A)True
B)False
Q2) Which of the following statements regarding mortgage-backed bonds is generally true?
A) The total value of the MBBs issued usually equals the value of the mortgages in the underlying pool
B) Unlike corporate bonds,MBBs usually are issued with variable coupon rates of interest
C) Overcollateralization of the mortgage pool assures investors that the income from mortgage will be sufficient to pay the interest on bonds,as well as,the principal upon maturity
D) All of the above
Q3) The standard PSA prepayment curve assumes prepayments of 2% and 4% in years 1 and 2,then 6% each year thereafter.
A)True
B)False
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Chapter 20: The Secondary Mortgage Market: Cmos and
Derivative Securities
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Sample Questions
Q1) In comparison to mortgage pass-though securities,CMOs attract a broader class of investors because,by prioritizing cash flows,they can offer more specific maturities.
A)True
B)False
Q2) For which of the following investments is the date of maturity known?
A) CMOs
B) MBBs
C) MPTs
D) MPTBs
Q3) A mortgage pass-through bond (MPTB)can be described by all of the following except:
A) anMPTB can be viewed as a mortgage-backed bond with the pass-through of principal and prepayment features of a mortgage pass-through security.
B) most MPTBs are based on residential mortgage pools and are generally overcollateralized.
C) anMPTB represents an undivided equity ownership interest in a mortgage pool.
D) allof the above are true.
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Page 22
Chapter 21: Real Estate Investment Trusts Reits
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Sample Questions
Q1) Because REITs are corporations,they are subject to double taxation.
A)True
B)False
Q2) A REIT must have at least 200 shareholders.
A)True
B)False
Q3) A portion of a REIT's dividend may be a non-taxable return of capital.
A)True
B)False
Q4) The early growth of the REIT industry in the 1970s was mainly attributed to which of the following?
A) Popularity of mortgage trusts.
B) Deregulation of the industry.
C) Declined performance of other investments.
D) Increased value of real property throughout the country.
Q5) FFO for a REIT is roughly equal to
A) NOI less interest deductions
B) Earnings before tax plus depreciation deductions
C) NOI plus interest deductions
D) Earnings per share plus capital gains
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Chapter 22: Real Estate Investment Performance and Portfolio Considerations
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Sample Questions
Q1) "If the returns of two securities are compared over time and there appears to be no relationship between their movements,what is the likely value of their coefficient of correlation?"
A) +1
B) -1
C) 0
D) + (infinity)
Q2) When comparing investment alternatives,the standard deviation is deemed to be a measure of risk.
A)True
B)False
Q3) The FRC Property Index can be characterized by all of the following except: A) theindex includes only properties with no outstanding mortgage debt.
B) theinformation used in compiling the index is voluntarily contributed by property owners.
C) theindex reflects payments to both property managers and portfolio asset managers. D) allof the above are true.
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