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WorksheetsREV211_PROPERTY INVESTMENT THEORY
Total questions: 10
Worksheet time: 5mins
Direct property investment is best described as an arrangement where the investor…
buys only REIT units through a fund manager
hires a broker to buy bonds
is directly involved with no middleman
purchases a unit trust that holds properties
Which characteristic of property is highlighted by heritage buildings that last for generations?
Heterogeneity
Durability
Scarcity
Divisibility
Systematic risk is the type of risk that…
is unique to one firm and can be diversified away
comes from external market-wide factors and cannot be diversified away
arises from poor internal management only
only affects property, not shares or bonds
Which of the following is an example of indirect property investment?
Purchasing land and building a house to sell
Buying shares of a listed property investment firms or REITs
Leasing a shop lot directly to a tenant
A sale-and-leaseback you execute yourself
Which characteristic most explains why real estate laws and markets are local in nature?
Durability
Immobility of land
Scarcity
Heterogeneity
Which is NOT a named property risk category?
Liability risk
Economic risk
Algorithmic trading risk
Legal risk
Yield (rate of return/capitalisation rate) is defined as the ratio between:
NOI and gross potential rent
Rental income and operating expenses
Return on investment (ROI) and capital outlay
Capital gain and exit price
Which statement about the rationale of yield?
Yield is unrelated to inflation or risk
Yield acts as a reward and helps cover risk and inflation effects
Yield measures only capital gain
Yield applies only to REITs
A property can be sold quickly only at a deep discount due to market inefficiency. This best illustrates which property-specific risk?
Management risk
Liquidity risk
Physical risk
Business/market risk
Which pairing is most accurate according to the yield?
Income yield = periodic rental/price; Total yield = IRR over the holding period
Income yield = IRR; Total yield = current rent/price
Income yield = cap rate + growth; Total yield = cap rate only
Income yield = net operating income; Total yield = capital gain only
