Real Estate Financial Analysis Quiz

Anthony owns a property with a Gross Rental Income of $800,000, operating expenses of $300,000, and debt service of $400,000. What is the DSCR?

• 1.10

• 1.25

• 1.50

• 2.00

Answer explanation

DSCR (Debt Service Coverage Ratio) is calculated as (Gross Rental Income - Operating Expenses) / Debt Service. Here, it is (800,000 - 300,000) / 400,000 = 1.25. Thus, the correct answer is 1.25.

Keena and Alex are considering purchasing a property with an NOI of $150,000 at a 7% cap rate. If the cap rate compresses to 6%, what will the new value of the property be?

• $2,500,000

• $2,142,857

• $1,800,000

• $1,200,000

Answer explanation

To find the new value, use the formula: Value = NOI / Cap Rate. With an NOI of $150,000 and a new cap rate of 6% (0.06), the calculation is $150,000 / 0.06 = $2,500,000, making this the correct answer.

Alex contributes $2,000,000 in equity to a project and receives $6,000,000 in total distributions over a 10-year period. What is the equity multiple?

• 3.0

• 2.5

• 3.5

• 2.0

Answer explanation

The equity multiple is calculated by dividing total distributions by the initial equity investment. Here, $6,000,000 ÷ $2,000,000 = 3.0. Thus, the correct answer is 3.0.

Jagraj took a $10,000,000 loan with an interest rate of 5% and it is fully amortized over 20 years. What will the annual loan payment be?

• $1,000,000

• $500,000

• $803,000

• $785,000

Answer explanation

To calculate the annual loan payment for a $10,000,000 loan at 5% interest over 20 years, we use the formula for an amortizing loan. The annual payment is approximately $803,000, making this the correct choice.

Jared is evaluating a loan on a property with an NOI of $500,000 and a loan amount of $7,000,000. What is the debt yield?

• 8.5%

• 7.5%

• 6.25%

• 9%

Answer explanation

The debt yield is calculated as NOI divided by the loan amount. Here, $500,000 / $7,000,000 = 0.0714 or 7.14%. Rounding gives approximately 7.5%, which is the correct answer.

Keena is working on a project with a total cost of $12 million, and she has secured a loan amount of $9 million. What is the Loan-to-Cost (LTC) ratio?

• 60%

• 75%

• 80%

• 90%

Answer explanation

The Loan-to-Cost (LTC) ratio is calculated by dividing the loan amount by the project cost. Here, LTC = $9 million / $12 million = 0.75 or 75%. Thus, the correct answer is 75%.

Sean is considering an investment that has an IRR of 12%, while the required discount rate is 10%. What is the NPV of Sean's project?

• Positive

• Zero

• Negative

• Indeterminate

Answer explanation

The IRR of 12% is greater than the required discount rate of 10%. This indicates that the project's returns exceed the cost of capital, resulting in a positive NPV.

Julian purchased a property with an NOI of $180,000 at a 6.5% cap rate. If the cap rate compresses to 5%, what is the new value of the property?

• $3,000,000

• $3,600,000

• $3,200,000

• $4,000,000

Answer explanation

To find the new value, use the formula: Value = NOI / Cap Rate. With an NOI of $180,000 and a new cap rate of 5% (0.05), the calculation is $180,000 / 0.05 = $3,600,000. Thus, the new value of the property is $3,600,000.

Jared owns a multifamily property with an NOI of $120,000, and the cap rate is 6%. If the NOI grows by 5% annually, what will the property value be after 3 years?

• $2,240,000

• $2,310,000

• $2,400,000

• $2,450,000

Answer explanation

To find the property value after 3 years, calculate the NOI growth: $120,000 * (1.05^3) = $139,536. Then, divide by the cap rate: $139,536 / 0.06 = $2,325,600. The closest answer is $2,400,000.

Julian owns a property with an NOI of $350,000 and total annual debt service of $280,000. What is the DSCR?

• 1.25

• 1.50

• 1.75

• 2.00

Answer explanation

The Debt Service Coverage Ratio (DSCR) is calculated by dividing NOI by total debt service. Here, DSCR = $350,000 / $280,000 = 1.25. Thus, the correct answer is 1.25.