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WorksheetsIA Module 6 to 12
Total questions: 124
Worksheet time: 1hrs 2mins
Name
Class
Date
1.
Market value multiplied by assessment ratio equals
a)
net income.
b)
assessed value.
c)
leasing expenses.
d)
property taxes.
e)
See Module 9 page Fixed Expenses for more information.
2.
A property has potential gross income of $100,000 and a vacancy rate of 8% and operating expenses of $32,000. What is the operating expense ratio?
a)
0.53
b)
0.65
c)
0.35
d)
0.32
e)
See Module 9 page Tests of Reasonableness for more information.
3.
A property is insured under a blanket policy covering all the owner’s properties. The blanket policy cost is $27,000 per year and the subject property policy represents 1/3 of the cost. If the insurer offers a 15% multi-property discount, what would be the cost of the subject property stand-alone policy?
a)
7826
b)
$10588 (Step 1. Convert the blanket policy cost to the cost for a stand-alone policy.
This is accomplished by converting the discounted cost to what it would have been had it not included the 15% discount. To solve for this, divide the discounted cost by the complement of the discount percentage.
100% - 15% = 85%
$27,000 ÷ .85 = $31,765
Step 2. Multiply the solution by the percentage of the cost represented by the subject property policy, which is 33.333%.
$31,765 x .3333333 = $10,588)
c)
9529
d)
9310
e)
See Module 9 page Fixed Expenses for more information.
4.
A property is insured under a blanket policy covering all the owner’s properties. The blanket policy cost is $27,000 per year and the subject property policy represents 30% of the cost. If the insurer offers a 13% multi-property discount, what would the cost of the subject property stand-alone policy?
a)
7168
b)
10345
c)
$9310 (Step 1. Convert the $27,000 blanket policy cost to the cost for a stand-alone policy.
This is accomplished by converting the discounted cost to what it would have been had it not included the discount. To solve for this, divide the discounted cost of by the complement of the discount percentage.
100% - 13% = 87%
$27,000 ÷ .87 = $31,035
Step 2. Multiply the solution by the percentage of the cost represented by the subject property policy.
$31,035 x .30 = $9,310.)
d)
9529
e)
See Module 9 page Fixed Expenses for more information.
5.
An example of a below the line item is
a)
debt service.
b)
fixed expenses.
c)
replacement allowances.
d)
variable expenses.
e)
See Module 9 page Operating Expenses for more information.
6.
Annual debt service is deducted from
a)
net operating income.
b)
potential gross income.
c)
effective gross income.
d)
total expenses.
e)
See Module 9 page Operating Expenses for more information.
7.
Competent management in the subject market would cost 5% of collected rent and 7% of the collected reimbursements. The subject property’s owner has been self-managing the property. Given the following, what is the appropriate management fee for the property?
• $390,000 effective gross income from rent
• $50,000 effective gross income from reimbursements
• $380,000 collected rent
• $40,000 collected reimbursements
a)
34256
b)
30800
c)
21800
d)
23000
e)
See Module 9 page Variable Expenses for more information.
8.
Competent management in the subject market would cost 7% of collected rent and collected reimbursements. The subject property’s owner has been self-managing the property. Given the following, what is the appropriate management fee for the property?
• $440,000 – effective gross income including reimbursements.
• $380,000 – collected rent.
•$40,000 – collected reimbursements
a)
30800
b)
10800
c)
20394
d)
29400
e)
See Module 9 page Variable Expenses for more information.
9.
If the property described below has 30,000 square feet, what are its annual expenses per square foot?
Potential Gross Income $2,000,000
Less Vacancy & Collection Loss (5%) – $100,000
Effective Gross Income $1,900,000
Fixed Expenses $175,000
Variable Expenses $425,000
Replacement Allowances $100,000 – $700,000
Net Operating Income $1,200,000
a)
40
b)
28
c)
23.33
d)
20
e)
See Module 9 page Reconstructed Operating Statement with Reimbursements for more information.
10.
If a parking lot needs repaving every eight years and is now five years old, what is the annual replacement allowance using a straight-line premise if it costs $12,000 to repave?
a)
2400
b)
4000
c)
1500
d)
12000
e)
See Module 9 page Methods for Dealing with Replacement Allowances for more information.
11.
If a property has a market value of $350,000, an assessed value of $245,000 and property taxes of $4,532.50, the effective tax rate would be equal to which of the following?
a)
0.01295
b)
0.0185
c)
0.0007
d)
0.000129
e)
See Module 9 page Fixed Expenses for more information.
12.
If a six-year old roof will cost $15,000 to replace and has a total life of 15 years, what is the annual replacement allowance using the sinking fund premise and a 9% yield rate?
a)
1666.66
b)
1151.98
c)
1000
d)
510.88
e)
A sinking fund is a never ending set aside, so when you put on a new "whatever" the fund just continues. Therefore, you always calculate the payment based on total expected life, not remaining life. A brand new roof would have same sinking fund amount as a 15-year-old roof, all else equal.
See Module 9 page Methods for Dealing with Replacement Allowances for more information.
13.
If replacement allowances are shown explicitly on an operating statement, they are part of
a)
vacancy and collection loss.
b)
fixed expenses.
c)
variable expenses.
d)
total expenses.
e)
See Module 9 page Operating Expenses for more information.
14.
If the property described below has 35,000 square feet, what are its annual expenses per square foot?
Potential Gross Income $2,000,000
Less Vacancy & Collection Loss (5%) – $100,000
Effective Gross Income $1,900,000
Fixed Expenses $175,000
Variable Expenses $425,000
Replacement Allowances $100,000 – $700,000
Net Operating Income $1,200,000
a)
23.33
b)
20
c)
28
d)
34.29
e)
See Module 9 page Reconstructed Operating Statement with Reimbursements for more information.
15.
In discounted cash flow analysis, how are leasing commissions almost always handled?
a)
The commissions are deducted as they are expected to happen during the projection period, above the IO line.
b)
The average of commissions over the projection period is deducted each year above the IO line.
c)
The average of commissions over the projection period is deducted each year below the IO line.
d)
The commissions are deducted as they are expected to happen during the projection period, below the IO line.
e)
See Module 9 page Leasing Commissions and Tenant Improvements for more information.
16.
In discounted cash flow analysis, how are tenant improvements almost always handled?
a)
The tenant improvements are deducted as they are expected to happen during the projection period, below the IO line.
b)
The average of tenant improvements over the projection period is deducted each year above the IO line.
c)
The average of tenant improvements over the projection period is deducted each year below the IO line.
d)
The tenant improvements are deducted as they are expected to happen during the projection period, above the IO line.
e)
See Module 9 page Leasing Commissions and Tenant Improvements for more information.
17.
In estimating the cost of a replacement allowance, past capital expenditures can be
a)
Sources of cost estimates include
b)
property managers, only.
c)
neither property managers nor subject property owners.
d)
property managers and subject property owners.
e)
subject property owners, only.
18.
In estimating the cost of a replacement allowance, past capital expenditures can be
a)
used only in the cost approach.
b)
trended forward for time.
c)
used without adjustment.
d)
trended backward for time.
e)
See Module 9 page Discussion: Replacement Allowance for more information.
19.
Market value multiplied by assessment ratio equals
a)
property taxes.
b)
leasing expenses.
c)
net income.
d)
assessed value.
e)
See Module 9 page Fixed Expenses for more information.
20.
Natural gas for an older 10-unit apartment building is master-metered. Tenants are required to reimburse the landlord for their one-tenth pro-rata share. The annual natural gas expense is projected to be $6,000. If occupancy is 100% due to rent control, and the landlord does not charge an administrative load, what is the monthly reimbursement per tenant?
a)
66.67
b)
55.56
c)
50
d)
60
e)
See Module 9 page Problem: Calculating Reimbursements for more information.
21.
Natural gas for an older 10-unit apartment building is master-metered. Tenants are required to reimburse the landlord for their one-tenth pro-rata share. The annual natural gas expense is projected to be $6,000. If occupancy is 90%, and the landlord does not charge an administrative load, what is the monthly reimbursement per tenant?
a)
55.56
b)
60
c)
50
d)
66.67
e)
See Module 9 page Problem: Calculating Reimbursements for more information.
22.
Natural gas for an older 10-unit apartment building is master-metered. Tenants are required to reimburse the landlord for their one-tenth pro-rata share. The annual natural gas expense is projected to be $6,000. If the occupancy is 100% due to rent control and the landlord charges a 20% administrative load, what is the monthly reimbursement per tenant?
a)
55.56
b)
66.67
c)
60
d)
50
e)
See Module 9 page Problem: Calculating Reimbursements for more information.
23.
Of the following, which is NOT considered a fixed expense?
a)
property insurance
b)
property tax
c)
roof replacement (This is a variable expense.)
d)
ground rent payment
e)
See Module 9 pages Fixed Expenses and Variable Expenses for more information.
24.
Of the following, which is NOT considered a variable expense?
a)
parking lot sweeping
b)
property tax payment (Property taxes are fixed expenses.)
c)
water bill
d)
elevator maintenance contract
e)
See Module 9 pages Fixed Expenses and Variable Expenses for more information.
25.
Of the following, which refers to the way replacement allowances are treated when constructing an operating statement?
a)
operating expense
b)
capital expenditures
c)
not recognized in an operating statement
d)
below-the-line expense
e)
See Module 9 page Operating Expenses for more information.
26.
Operating expenses that generally do NOT vary with occupancy and which prudent management will pay whether the property is occupied or vacant are
a)
replacement allowance.
b)
variable expenses.
c)
operating expenses.
d)
fixed expenses.
e)
See Module 9 page Operating Expenses for more information.
27.
Refer to the income and expense information below. If the appropriate replacement allowance for all short-lived components is 3% of EGI, what is the property’s net operating income?
Effective Gross Income (EGI) $100,000
Fixed Expenses $11,000
Variable Expenses $18,000
a)
71000
b)
70130
c)
32000
d)
68000
e)
See Module 9 page Methods for Dealing with Replacement Allowances Part 1 for more information.
28.
Refer to the income and expense information below. If the market indicates a 5% capitalization rate, calculated with no deduction for replacement allowances, what is the value of this property?
Effective Gross Income $100,000
Fixed Expenses $11,000
Variable Expenses $18,000
a)
601852
b)
1420000
c)
1398148
d)
2000000
e)
See Module 9 page Methods for Dealing with Replacement Allowances Part 1 for more information.
29.
Refer to the income and expense information below. If the market indicates a 6% capitalization rate, calculated with no deduction for replacement allowances, what is the value of this property?
Effective Gross Income $100,000
Fixed Expenses $11,000
Variable Expenses $18,000
a)
1183333
b)
1666667
c)
1141667
d)
1225000
e)
See Module 9 page Methods for Dealing with Replacement Allowances Part 2 for more information.
30.
Sources of cost estimates include
a)
property managers, only.
b)
neither property managers nor subject property owners.
c)
property managers and subject property owners.
d)
subject property owners, only.
e)
See Module 9 page Discussion: Replacement Allowance for more information.
31.
Sources of cost estimates include
a)
property managers, only.
b)
comparable sales, only.
c)
neither comparable sales nor property managers.
d)
comparable sales and property managers.
e)
See Module 9 page Discussion: Replacement Allowance for more information.
32.
The operating expense ratio
a)
is equal to the effective gross income divided by the net operating income.
b)
is equal to the total operating expenses divided by the net operating income.
c)
is equal to the total operating expenses divided by the effective gross income.
d)
is equal to the total operating expenses divided by the potential gross income.
e)
See Module 9 page Tests of Reasonableness for more information.
33.
The periodic expenditures necessary to maintain the real property and continue production of effective gross income is
a)
fixed expenses.
b)
operating expenses.
c)
variable expenses.
d)
management fee.
e)
See Module 9 page Operating Expenses for more information.
34.
This type of expense is also referred to as "ordinary expenses" or "above-the-line" expenses.
a)
operating expense
b)
variable expense
c)
fixed expense
d)
replacement allowance
e)
See Module 9 page Operating Expenses for more information.
35.
Total expenses are deducted from
a)
potential gross income.
b)
net operating income.
c)
effective gross income.
d)
equity income.
e)
See Module 9 page Operating Expenses for more information.
36.
Two components of a concrete tilt-up industrial building are the concrete floor and the concrete walls. For which, if any, should a replacement allowance be reflected?
a)
neither
b)
wall, only
c)
floor, only
d)
floor and walls
e)
See Module 9 page Discussion: Replacement Allowance for more information.
37.
Two components of an apartment building are floor coverings and window coverings. For which, if any, should a replacement allowance be reflected?
a)
window coverings, only
b)
neither
c)
floor coverings and window coverings
d)
floor coverings, only
e)
See Module 9 page Discussion: Replacement Allowance for more information.
38.
Two components of an apartment building are the stairwells and exterior walls. For which, if any, should a replacement allowance be reflected?
a)
stairwells, only
b)
walls, only
c)
neither
d)
stairwells and walls
e)
See Module 9 page Discussion: Replacement Allowance for more information.
39.
Using the sinking fund premise, what is the annual replacement allowance for a piece of equipment with a five-year life that will cost $30,000 to replace if the safe rate is 2%?
a)
5765
b)
6000
c)
5434
d)
6365
e)
See Module 9 page Methods of Dealing with Replacement Allowances Part 1 for more information.
40.
Water for an older 20-unit apartment is master-metered. Tenants are required to reimburse the landlord for their one-twentieth pro-rata share. The annual water expense is projected to be $3,600. If occupancy is 100% due to rent control, and the landlord does not charge an administrative load, what is the total annual water reimbursement?
a)
4320
b)
3240
c)
3888
d)
3600
e)
See Module 9 page Problem: Calculating Reimbursements for more information.
41.
What calculated test or tests of reasonableness is/are available for operating expenses?
a)
all of these answers
b)
annual expenses per unit of comparison, only
c)
operating expense ratio, only
d)
none of these answers
e)
See Module 9 page Tests of Reasonableness for more information.
42.
What is the most appropriate unit of comparison for apartment expenses?
a)
cost per seat
b)
cost per linear foot of building perimeter
c)
cost per parking space
d)
cost per unit
e)
See Module 9 page Tests of Reasonableness for more information.
43.
What is the most appropriate unit of comparison for office building expenses?
a)
cost per elevator
b)
cost per square foot
c)
cost per tenant
d)
cost per parking space
e)
See Module 9 page Tests of Reasonableness for more information.
44.
What is the net income ratio (NIM) for the following property?
Potential Gross Income $1,500,000
Less Vacancy & Collection Loss (6%) – $90,000
Effective Gross Income $1,410,000
Fixed Expenses $150,000
Variable Expenses $350,000
Replacement Allowances $60,000 – $560,000
Net Operating Income $850,000
a)
0.6
b)
0.35
c)
0.4
d)
65% (This is NIM excluding RA.)
e)
See Module 9 page Reconstructed Operating Statement with Reimbursements for more information.
45.
What rate or rates are used in the sinking fund premise for calculating replacement allowances?
a)
overall capitalization rate or mortgage capitalization rate
b)
property yield rate, only
c)
property yield rate or safe rate, depending on the item
d)
discount rate equal to zero
e)
See Module 9 page Methods of Dealing with Replacement Allowances Part 1 for more information.
46.
When reimbursements are above a base year, What does the tenant do for expenses that exceed the level of the base year?
a)
does not have to pay reimbursements
b)
reimburses the landlord for the expenses
c)
nothing
d)
splits reimbursements with the landlord
e)
See Module 9 page Reimbursements for more information.
47.
When reimbursements are capped, what does the tenant do for expenses that rise above a level stated in the lease?
a)
nothing
b)
does not have to pay reimbursements
c)
splits reimbursements with the landlord
d)
reimburses the landlord for the expenses
e)
See Module 9 page Reimbursements for more information.
48.
Which is a good source for hotel expense information?
a)
International Council of Shopping Centers
b)
Building Owners and Managers Association
c)
PKF Hospitality Research
d)
Multiple Listing Service
e)
See Module 9 page Variable Expenses for more information.
49.
Which is a good source for office building expense information?
a)
Multiple Listing Service
b)
International Council of Shopping Centers
c)
PKF Hospitality Research
d)
Building Owners and Managers Association
e)
See Module 9 page Variable Expenses for more information.
50.
Which of the following are appropriate methods for estimating replacement allowances?
a)
none of the answers
b)
straight-line recapture using current cost over useful life, only
c)
all of the answers
d)
dollar amount per square foot of building area, only
e)
See Module 9 page Methods of Dealing with Replacement Allowances Part 1 and Part 2 for more information.
51.
Which of the following are often reported in connection with operating statements, but are not considered operating expenses?
a)
debt service
b)
replacement allowance
c)
administrative expense
d)
fixed expense
e)
See Module 9 page Operating Expenses for more information.
52.
Which of the following is an expense often or sometimes shown “below the line?”
a)
utilities
b)
insurance
c)
property taxes
d)
leasing commissions
e)
See Module 9 page Leasing Commissions and Tenant Improvements for more information.
53.
Which of the following is NOT an example of an item that would require coverage in a replacement allowance?
a)
roof
b)
floor coverings
c)
parking lot
d)
staircase
e)
See Module 9 page Replacement Allowance for more information.
54.
The amount of vacant space that is needed in a market for its orderly operation is
a)
structural vacancy.
b)
frictional vacancy.
c)
physical vacancy.
d)
market vacancy.
e)
See Module 8 page Types of Vacancy for more information.
55.
A deduction from potential gross income (PGI) made to reflect income reductions due to vacancies, tenant turnover, and nonpayment of rent is
a)
occupancy and rent collected.
b)
vacancy and rent collected.
c)
vacancy and collection loss.
d)
occupancy and collection loss.
e)
See Module 8 page Vacancy and Collection Loss for more information.
56.
The actual amount of available space, either in a property or a market is referred to as
a)
market vacancy.
b)
frictional vacancy.
c)
physical vacancy.
d)
structural vacancy.
e)
See Module 8 page Types of Vacancy for more information.
57.
The actual amount of available space, either in a property or a market is
a)
frictional vacancy.
b)
market vacancy. (Market vacancy is the overall vacancy rate that occurs as a result of the interaction of supply and demand of a particular property type in a particular region or market.)
c)
physical vacancy.
d)
structural vacancy.
e)
See Module 8 page Types of Vacancy for more information.
58.
The overall vacancy rate that occurs as a result of the interaction of supply and demand of a particular property type in a particular region or market is
a)
physical vacancy.
b)
frictional vacancy.
c)
structural vacancy.
d)
market vacancy.
e)
See Module 8 page Types of Vacancy for more information.
59.
Likely sources for vacancy and collection loss data include all EXCEPT
a)
an appraiser's opinion based on years of experience. (This is not a likely source for vacancy and collection loss data.)
b)
sale comparables.
c)
rent comparables.
d)
published surveys.
e)
See Module 8 page Vacancy and Collection Loss Data for more information.
60.
Assume an apartment building with 25 one-bedroom units, each 300 sq. ft. and monthly rent of $800, and 20 two-bedrooms, each 600 sq. ft.and monthly rent of $1,000. If two of the one-bedrooms are vacant and five of the two-bedrooms are vacant, what is the physical vacancy as a percentage of square footage?
a)
0.2
b)
0.165
c)
0.18
d)
0.16
e)
See Module 8 page Example: Physical versus Economic Vacancy for more information.
61.
Assume an apartment building with 100 one-bedroom units, each 300 sq. ft. and monthly rent of $900, and 20 two-bedrooms, each 600 sq. ft. and monthly rent of $1,500. If eight of the one-bedrooms are vacant and six of the two-bedrooms are vacant, what is the economic vacancy?
a)
0.1
b)
0.12
c)
0.135
d)
0.13
e)
See Module 8 page Example: Physical Versus Economic Vacancy for more information.
62.
Assume an apartment building with 100 one-bedroom units, each 500 sq. ft. and monthly rent of $900, and 20 two-bedrooms, each 700 sq. ft. and monthly rent of $1,500. If eight of the one-bedrooms are vacant and six of the two-bedrooms are vacant, what is the physical vacancy as a percentage of square footage?
a)
0.135
b)
0.1
c)
0.12
d)
0.13
e)
See Module 8 page Example: Physical Versus Economic Vacancy for more information.
63.
Assume coming year's potential gross income for the leased fee interest in a property is $500,000, with a projected vacancy and collection loss of 5%. Operating expenses are 38%. What is the effective gross income?
a)
475000
b)
500000
c)
310000
d)
294500
e)
See Module 8 page Vacancy and Collection Loss for more information.
64.
The term that refers to the right, but not the obligation, of a tenant to continue a lease at a specified term and rent is
a)
a renewal option.
b)
a flat rental lease.
c)
a buyout clause.
d)
an escape clause.
e)
See Module 7 page Income Characteristics of Leases and Other Key Lease Provisions for more information.
65.
A provision in a lease that allows a tenant to cancel a lease is
a)
a buyout clause.
b)
a pass-through.
c)
an escape clause.
d)
a renewal option.
e)
See Module 7 page Income Characteristics of Leases and Other Key Lease Provisions for more information
66.
The three income characteristics of a lease are
a)
gross, modified gross, and net. (These are the three types of leases based on division of expenses.)
b)
quantity, quality, and durability.
c)
net, net net, and net net net.
d)
flat, index, and graduated.
e)
See Module 7 page Income Characteristics of Leases and Other Key Lease Provisions for more information.
67.
A form of additional rent in which the tenant pays a proportionate share of the operating expenses is
a)
a buyout clause.
b)
a pass-through.
c)
a renewal option.
d)
an escape clause.
e)
See Module 7 page Income Characteristics of Leases and Other Key Lease Provisions for more information.
68.
The clause in a lease that limits a tenant's share of operating expenses is
a)
an expense hold.
b)
an expense cap.
c)
an expense stop.
d)
an expense start.
e)
See Module 7 page Income Characteristics of Leases and Other Key Lease Provisions for more information.
69.
The clause in a lease that limits the landlord's expense obligation because the lessee assumes any expenses above an established level is
a)
an expense cap.
b)
an expense stop.
c)
an expense hold.
d)
an expense start.
e)
See Module 7 page Income Characteristics of Leases and Other Key Lease Provisions for more information.
70.
A lease in which the tenant pays a stated rent every month, plus all operating expenses is
a)
gross.
b)
net net.
c)
net.
d)
full service.
e)
See Module 7 page Lease Characteristics for more information.
71.
The lease that provides for periodic rent adjustments based on the market rental rate of the space is
a)
a graduated rental lease. (A graduated rental lease is a lease that provides for specified changes in rent at one or more points during the lease term, e.g., step-up and step-down leases, or leases with a set percentage adjustment.)
b)
an index lease.
c)
a percentage lease.
d)
a revaluation lease.
e)
See Module 7 page Lease Characteristics for more information.
72.
A lease in which the landlord pays all operating expenses is
a)
net.
b)
net net net.
c)
modified gross.
d)
gross. (In this lease type the tenant pays a stated rent every month, and the landlord pays all operating expenses including utilities.)
e)
See Module 7 page Lease Characteristics for more information.
73.
What is a lease where the fee owner leases the entire property to a single entity in return for a stipulated rent, and the master lessee, who may install (additional) improvements, then leases the property to multiple tenants?
a)
a master lease
b)
a ground lease
c)
a revaluation lease
d)
a flat rental lease
e)
See Module 7 page Other Lease Concepts for more information.
74.
Executive office suites, where a company will lease an entire floor of an office building, and then lease single offices to individual tenants, is an example of
a)
an index lease.
b)
a master lease.
c)
a percentage lease.
d)
a graduated rental lease.
e)
See Module 7 page Other Lease Concepts for more information.
75.
The two primary adjustment techniques used to estimate market rent are
a)
relative comparison analysis and ranking analysis.
b)
quantitative and qualitative.
c)
matched pairs and quantitative.
d)
matched pairs and qualitative.
e)
See Module 7 pages Market Rent Estimates and Qualitative Analysis Techniques for more information.
76.
Why are rent comparables often harder to confirm than sale comparables?
a)
Leases are less likely to be of public record.
b)
Sales are always available for review by the public.
c)
Leases are never recorded.
d)
Leases are always confidential.
e)
See Module 7 page Market Rent Estimates for more information.
77.
An inducement for a tenant to lease space is referred to as
a)
stimulus.
b)
an incentive.
c)
a bribe.
d)
a concession.
e)
See Module 6 page Types of Rent and Related Rent Concepts - Part 2 for more information.
78.
The most probable rent that a property should bring in a competitive and open market, reflecting all conditions and restrictions of the typical lease agreement is
a)
face rent.
b)
scheduled rent.
c)
market rent.
d)
effective rent.
e)
See Module 6 pages Types of Rent and Related Rent Concepts – Part 1 and Part 2 for more information
79.
Also known as nominal rent, this rent type is rent prior to deduction of concessions.
a)
effective rent
b)
contract rent
c)
face rent
d)
deficit rent
e)
See Module 6 page Types of Rent and Related Rent Concepts – Part 1 for more information.
80.
The type of clause in a lease that provides for the adjustment of rent based on some event or index is
a)
adjustment.
b)
escalation income.
c)
rent change.
d)
event.
e)
See Module 6 page Types of Rent and Related Rent Concepts – Part 2 for more information.
81.
The rental income received in accordance with the terms of a percentage lease is
a)
deficit rent.
b)
percentage rent.
c)
contract rent.
d)
effective rent.
e)
See Module 6 page Types of Rent and Related Rent Concepts – Part 2 for more information.
82.
Which of the following refers to the amount by which contract rent is less than market rent at the time of appraisal?
a)
effective rent
b)
excess rent
c)
deficit rent (Deficit rent is defined as the amount by which contract rent is less than market rent at the time of the appraisal.)
d)
scheduled rent
e)
See Module 6 pages Types of Rent and Related Rent Concepts – Part 1 and Part 2 for more information.
83.
Which of the following is the total income attributable to real property at full occupancy before vacancy and operating expenses are deducted?
a)
potential gross income (Potential gross income is defined as the total income attributable to real property at full occupancy before vacancy and operating expenses are deducted.)
b)
net operating income
c)
effective gross income
d)
pre=tax cash flow
e)
See Module 6 page Income and Leases Introduction – Potential Gross Income (PGI) for more information.
84.
What is the level of sales at which a percentage clause in a lease is activated?
a)
leveling
b)
activating point
c)
starting point
d)
breakpoint
e)
See Module 6 page Types of Rent and Related Rent Concepts – Part 2 for more information.
85.
What is the breakpoint that can be calculated by dividing base rent by the stated percent?
a)
percentage breakpoint
b)
simple breakpoint
c)
unnatural breakpoint
d)
natural breakpoint
e)
See Module 6 page Types of Rent and Related Rent Concepts – Part 2 for more information.
86.
Annual rent under a shopping center lease is summarized as $100,000 plus 5% of gross sales over $2,000,000. The tenant is forecast to gross $2,500,000 this year. The market rent for this space is $75,000 plus 3% of gross sales over $1,500,000. How much rent will the tenant pay this year?
a)
100000
b)
105000
c)
125000
d)
150000
e)
See Module 6 page Putting It To Work for more information.
87.
Annual rent under a shopping center lease is summarized as $100,000 plus 5% of gross sales over $2,000,000. The tenant is forecast to gross $2,500,000 this year. The market rent for this space is $75,000 plus 3% of gross sales over $1,500,000. What is overage rent that the tenant will pay this year?
a)
25000
b)
15000
c)
125000
d)
30000
e)
See Module 6 page Putting It To Work for more information.
88.
Contract rent prior to a deduction for concessions is
a)
face rent.
b)
scheduled rent.
c)
market rent.
d)
effective rent.
e)
See Module 6 pages Types of Rent and Related Rent Concepts – Part 1 and Part 2 for more information.
89.
Given the following information about a $400,000 loan amortized over 30 years at 5% payable monthly, what amount is deducted from rents received on last year’s federal tax return?
$5,901 principal paydown last year
$19,866 interest paid last year
$25,767 annual debt service last year
a)
24452
b)
5901
c)
19866
d)
25767
e)
See Module 9 page Operating Expenses for more information.
90.
Given the following information about a $300,000 loan amortized over 30 years at 4% payable monthly, what amount is deducted from rents received on last year’s federal tax return?
$17,187 annual debt service
$5,283 principal paydown last year
$11,904 interest paid last year
a)
23422
b)
17187
c)
5283
d)
11904
e)
See Module 9 page Operating Expenses for more information.
91.
Should an appraiser check a proposed shopping center’s leases?
a)
Yes, to verify the leases agree with the pro forma potential gross income, only.
b)
No, it is not necessary.
c)
Yes, for lessor/lessee signatures and for agreement with pro forma potential gross income.
d)
Yes, to verify they are signed by both lessor and lessees, only.
e)
See Module 7 page Income Characteristics of Leases and other Key Lease Provisions for more information.
92.
Income and expenses for a 100% leased, 50,000-square-foot shopping center is projected as follows:
• $2,000,000 in rental income
• $660,000 expenses excluding management
• 15% administrative and marketing fee for all tenants
What is the reimbursement rate per square foot excluding the administrative and marketing fee if the center is being valued as leased fee?
a)
13.2
b)
15.18
c)
40
d)
26.8
e)
See Module 9 page Reimbursements for more information.
93.
What is the total reimbursement amount for the following 100% leased shopping center for which the leased fee is being valued?
• 40,000 square feet
• $1,400,000 in rental income
• $420,000 expenses excluding management
• 12% administrative and marketing fee for all tenants
a)
50400
b)
369600
c)
470400
d)
420000
e)
See Module 9 page Reimbursements for more information.
94.
Income and expenses for a 100% leased, 40,000-square-foot shopping center is projected as follows:
• $1,400,000 in rental income
• $420,000 expenses excluding management
• 12% administrative and marketing fee for all tenants
What is the reimbursement rate per square foot excluding the administrative and marketing fee if the center is being valued as leased fee?
a)
10.5
b)
11.76
c)
24.5
d)
35
e)
See Module 9 page Reimbursements for more information.
95.
The following applies to a recently completed shopping center:
$10,000,000 cost approach before lease up costs and entrepreneurial incentive
$2,000,000 lease up costs and entrepreneurial incentive
$12,500,000 current contract sale amount
30% assessment ratio
40.00 millage rate last year that increases 10% for the coming year
If real property taxes are based on the cost approach including lease-up costs and estimated entrepreneurial incentive, what are projected taxes?
a)
144000
b)
158400
c)
165000
d)
132000
e)
See Module 9 page Fixed Expenses for more information.
96.
The following applies to a recently completed shopping center:
$9,000,000 cost approach before lease up costs and entrepreneurial incentive
$1,500,000 lease up costs and entrepreneurial incentive
$11,000,000 current contract sale amount
40% assessment ratio
40.00 millage rate last year that increases 10% for the coming year
If real property taxes are based on market value as evidenced by a sale, what are projected taxes?
a)
193600
b)
176000
c)
184800
d)
168000
e)
See Module 9 page Fixed Expenses for more information.
97.
Which of the following properties has a debt coverage ratio (net operating income divided by annual debt service) that is most likely to be a concern to a lender client?
A B C D
Effective Gross Income $1,000,000 $1,200,000 $1,400,000 $1,600,000
Expenses $400,000 $500,000 $600,000 $700,000
Net Operating Income $600,000 $700,000 $800,000 $900,000
Annual Debt Service $500,000 $650,000 $900,000 $800,000
a)
D
b)
B
c)
C
d)
A
e)
See Module 4 page Mortgage Capitalization Rate
for more information.
98.
Which of the following proposed shopping centers has a loan-to-value ratio (loan amount divided by value or sale price) that is most likely to be a concern to a lender client?
A B C D
Cost Approach $10,000,000 $10,000,000 $10,000,000 $10,000,000
Income Approach $10,500,000 $7,500,000 $10,500,000 $11,000,000
Sales Comparison Approach $10,700,000 $8,000,000 $9,500,000 $12,000,000
Proposed Loan Amount $8,000,000 $6,500,000 $11,000,000 $8,000,000
a)
D
b)
A
c)
C
d)
B
e)
See Module 4 page Mortgage Constant Calculation #1 for more information.
99.
For the following fully leased shopping center pro forma, what are the operating statement’s total expenses? All leases call for tenants to pay their share of actual fixed and variable expenses except management and replacement allowance, plus a 10% administrative and marketing fee (administrative load) in lieu of management costs.
Rent $800,000
Taxes $200,000
Insurance $10,000
Management $40,000
Admin & Marketing Fee $24,600
Repairs & Maintenance $ 4,000
Utilities $8,000
Common Area Maintenance $19,000
Replacement Allowances $5,000
a)
310600
b)
270600
c)
246000
d)
286000
e)
See Module 9 page Problem: Reconstructed Operating Statements with Reimbursements for more information.
100.
For the following fully leased shopping center pro forma, which operating statement shows proper treatment of reimbursements? All leases call for tenants to pay their share of actual fixed and variable expenses except management, plus a 15% administrative and marketing fee (administrative load).
A B C D
Rent $400,000 $400,000 $400,000 $400,000
Reimbursements $10,000 $18,150 $121,000 $139,150
Gross Income $410,000 $418,150 $521,000 $539,150
Taxes $100,000 $100,000 $100,000 $100,000
Insurance $5,000 $5,000 $5,000 $5,000
Repairs & Maintenance $2,000 $2,000 $2,000 $2,000
Utilities $4,000 $4,000 $4,000 $4,000
Common Area Maintenance $10,000 $10,000 $10,000 $10,000
Total Expenses except Management $121,000 $121,000 $121,000 $121,000
Admin & Marketing Fee $18,150 $18,150 $18,150 $18,150
a)
C
b)
B
c)
D
d)
A
e)
See Module 9 page Problem: Reconstructed Operating Statements with Reimbursements for more information.
101.
Income and expenses for a 100% leased, 30,000-square-foot shopping center is projected as follows:
• $800,000 in rental income
• $360,000 expenses excluding management
• 10% administrative and marketing fee for all tenants
What is the reimbursement rate per square foot excluding the administrative and marketing fee if the center is being valued as leased fee?
a)
14.67
b)
13.2
c)
12
d)
26.67
e)
See Module 9 page Reimbursements for more information.
102.
The following applies to a recently completed shopping center:
$9,000,000 cost approach before lease up costs and entrepreneurial incentive
$1,500,000 lease up costs and entrepreneurial incentive
$11,000,000 current contract sale amount
40% assessment ratio
40.00 millage rate last year that increases 10% for the coming year
If real property taxes are based on the cost approach including lease-up costs and estimated entrepreneurial incentive, what are projected taxes?
a)
184800
b)
168000
c)
193600
d)
158400
e)
See Module 9 page Fixed Expenses for more information.
103.
The following applies to a recently completed shopping center:
$10,000,000 cost approach before lease up costs and entrepreneurial incentive
$2,000,000 lease up costs and entrepreneurial incentive
$12,500,000 current contract sale amount
30% assessment ratio
40.00 millage rate last year that increases 10% for the coming year
If real property taxes are based on the cost approach including lease-up costs and estimated entrepreneurial incentive, what are projected taxes?
a)
144000
b)
165000
c)
158400
d)
132000
e)
See Module 9 page Fixed Expenses for more information.
104.
Which of the following properties has a debt coverage ratio (net operating income divided by annual debt service) that is most likely to be a concern to a lender client?
A B C D
Effective Gross Income $1,000,000 $1,200,000 $1,400,000 $1,600,000
Expenses $400,000 $500,000 $600,000 $700,000
Net Operating Income $600,000 $700,000 $800,000 $900,000
Annual Debt Service $700,000 $650,000 $750,000 $800,000
a)
A
b)
C
c)
D
d)
B
e)
See Module 4 page Mortgage Capitalization Rate for more information.
105.
For the following fully leased shopping center pro forma, which column shows proper treatment of reimbursements? All leases call for tenants to pay their share of actual fixed and variable expenses except management, plus a 10% administrative and marketing fee (administrative load).
A B C D
Rent $500,000 $500,000 $500,000 $500,000
Reimbursements $15,000 $17,900 $179,000 $196,900
Gross Income $515,000 $517,900 $679,000 $696,900
Taxes $150,000 $150,000 $150,000 $150,000
Insurance $7,000 $7,000 $7,000 $7,000
Repairs & Maintenance $2,000 $2,000 $2,000 $2,000
Utilities $5,000 $5,000 $5,000 $5,000
Common Area Maintenance $15,000 $15,000 $15,000 $15,000
Total Expenses except Management $179,000 $179,000 $179,000 $179,000
Admin & Marketing Fee $17,900 $17,900 $17,900 $17,900
a)
B
b)
A
c)
D
d)
C
e)
See Module 9 page Problem: Reconstructed Operating Statements with Reimbursements for more information.
106.
A revaluation lease is one that provides for periodic rent adjustments based on
a)
a specified percentage of the volume of the business.
b)
the change in an economic index.
c)
the market rental rate of the space.
d)
step-ups or step-downs at specific points during the lease term.
e)
See Module 7 page Lease Characteristics for more information.
107.
Face rent is
a)
contract rent prior to the deduction of concessions.
b)
the same as effective rent.
c)
the same as contract rent.
d)
contract rent prior to the addition of concessions.
e)
See Module 6 page Types of Rent and Related Rent Concepts – Part 1 for more information.
108.
In a fixed rate, level payment, fully amortizing loan, how, if at all, does the interest portion of each payment change over the life of the loan?
a)
It depends on the frequency of payments.
b)
It rises.
c)
It declines.
d)
It is level.
e)
See Module 4 page Loan Balances for more information.
109.
Quantitative techniques can be applied to
a)
comparable sales and rents only.
b)
comparable sales, rents, and expenses.
c)
comparable sales only.
d)
comparable sales and expenses only.
e)
See Module 7 page Market Rent Estimates for more information.
110.
The expense stop protects the landlord and the expense cap protects the tenant.
a)
Neither protect either the landlord or tenant.
b)
Both landlord and tenant are protected by both clauses.
c)
The expense cap protects the landlord and the expense stop protects the tenant.
d)
See Module 7 page Income Characteristics of Leases and Other Key Lease Provisions for more information.
e)
See Module 3 page The Second of the Six Functions of One for more information.
111.
The net income multiplier is the reciprocal of the
a)
gross income multiplier.
b)
gross rent multiplier.
c)
yield rate.
d)
overall capitalization rate.
e)
See Module 9 page Tests of Reasonableness for more information.
112.
The overall capitalization rate is the reciprocal of the
a)
gross rent multiplier.
b)
property yield rate.
c)
net income multiplier.
d)
gross income multiplier.
e)
See Module 9 page Tests of Reasonableness for more information.
113.
What is the typical order of the levels of income, from largest to smallest amount?
a)
potential gross income, effective gross income, equity income, net operating income
b)
potential gross income, effective gross income, net operating income, equity cash flow
c)
effective gross income, potential gross income, net operating income, equity cash flow
d)
See Module 5 page Levels of Income for more information.
e)
Who is protected by an expense stop and who is protected by an expense cap?
114.
When graphing the future value of One per period, what, if any, is the difference between the graph of the lender’s perspective and the borrower’s perspective?
a)
There is no difference in the graphs.
b)
The directions of the cash flows are different, only.
c)
The amounts of the cash flows are different, only.
d)
The amounts and directions of the cash flows are different.
e)
See Module 2 page Graph from Borrower Perspective for more information.
115.
When valuing a leased fee interest in a 95% occupied, multitenant property using discounted cash flow analysis,
a)
space under lease is valued on market rent and vacant space is valued on contract rent.
b)
all space is valued on contract rent.
c)
all space is valued on market rent.
d)
space under lease is valued on contract rent and vacant space is valued on market rent.
e)
See Module 6 page Income and Leases Introduction – Potential Gross Income (PGI) for more information.
116.
Which two financial functions of One are reciprocals of each other?
a)
The present value of One and the sinking fund factor.
b)
The present value of One and the present value of One per period.
c)
The present value of One and the future value of One per period.
d)
The present value of One and the future value of One.
e)
See Module 3 page The Second of the Six Functions of One for more information.
117.
Which two financial functions of One are reciprocals of each other?
a)
The sinking fund factor and the installment to amortize One.
b)
The sinking fund factor and the future value of One per period.
c)
The future value of One and the future value of One per period.
d)
The sinking fund factor and the present value of One per period.
e)
See Module 3 page The Last of the Six Functions of One for more information.
118.
In the expression "return on and return of" what is expected to be returned?
a)
time
b)
interest
c)
direction
d)
principal
e)
The 'return of' refers to the principal.
119.
What is the projected effective gross income for the following shopping center that charges tenants for their pro-rata share of all nonmanagement expenses based on gross space, including a percentage for marketing and administration?
Total expenses (excluding management) of $450,000
A 4% management cost on effective gross income
An administrative and marketing fee of 10%
A 6% projected vacancy rate
Potential gross rents of $1,100,000
a)
1602700
b)
1595000
c)
1572900
d)
1499300
e)
Solution:
Potential Gross Income Rent $1,100,000 Expense reimbursements including 10% admin. fee: $450,000 x 1.10 495,000 Total potential gross income $1,595,000 Less vacancy and collection loss (6%) 95,700 Effective gross income $1,499,300
Module 8 includes important information on this topic.
Note. This problem has excess information, just like in the real world. Excess information should be expected on the exam.
120.
What are two components of annual debt service IM?
a)
principal paydown and loan balance
b)
principal paydown and amortization
c)
interest and loan balance
d)
interest and principal paydown
e)
Review Module 5 for information related to this question.
121.
An appraiser projected a property's next-year net operating income. What rate should be used to convert this amount into value?
a)
interest rate
b)
overall capitalization rate
c)
quity capitalization rate
d)
yield rate
e)
Review Module 5 for information related to this question.
122.
Which is a common way for leasing commissions to be handled for an unoccupied building in direct capitalization?
a)
rental rate adjustment
b)
lump-sum deduction from capitalized income as though occupied
c)
lump-sum deduction as an operating expense
d)
capitalization rate adjustment
e)
Review Module 10 for information related to this question.
123.
What is deducted from net operating income to result in pretax cash flow?
a)
reimbursements
b)
annual debt service
c)
equity cash flow
d)
tax-deductible interest and depreciation
e)
Review Module 5 for information related to this question.
124.
How much must a vacant land parcel sell for in 10 years for the investor to yield 10% if it cost $1,100,000 and the holding costs were $100,000 per year?
a)
4446859
b)
1259374
c)
3206888
d)
1100000
e)
In this problem, it is critical to reflect the directions of the cash flows. The investor is out of pocket for not only the purchase price but also for the annual holding costs.
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