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REE 4103 FINAL EXAM
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Exam of 10 pages for the course REE 301 at REE 301 (REE 4103 FINAL EXAM)
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REE 4103 FINAL EXAMA _______________ would have the lowest ratio of operating expenses to gross
income incurred by the landlord - ANS-Retail and Industrial properties*
A formal appraisal report must include the: - ANS-• Date of the value estimate***
• Signature of the appraiser
• ID of the property appraised
• Certification****
A lease clause that limits the expenses of the landlord is termed a: - ANS-escalation
clause/EXPENSE CAP/Expense Clause**
A lease with the following annual payments: Year 1: $10,000 Year 2: $12,000 Year 3:
$14,000 Year 4: $16,000; would be called what type of lease? - ANS-Step-up lease**
A property sold for $555,000. The buyer anticipated the potential gross income would
be $93,000, the vacancy would be 5%, and expenses would be 53% of EGI in the year
after the purchase. What is the overall capitalization rate (RO)? - ANS-R = NIR / EGIM
NIR = 1 - .53 = .47
EGI = 93,000 - (.05*93,000) = 88,350
EGIM = 555,,350
EGIM = 6.28
R = NIR / EGIM = ..28 = .0748 or 7.48%***
A property with a variable income and unknown resale price. Its holding period is
estimated at 7 years. The reversion at the end of the holding period is estimated to
increase by a total of 11% over the entire holding period. The estimated discount rate
for the property is 9%. If the net present value of just the income over the holding period
is $300,000, what is the present value of the property when taking into consideration the
reversion? - ANS-???***
A property with NOI of $220,000 and annual debt service of $83,000. The Rm
(mortgage constant) equals .1090, and the M (loan to value ratio) is .65. What is the
overall cap rate indicated when using the debt coverage formula? - ANS-???***
A reconstructed operating statement for an owner operated property should include -
ANS-Vacancy and collection loss: EGI, operating expenses, fixed expenses, variable
, expenses, replacement allowance, total operating expenses, NOI, additional calculation,
expense and income ratios**
Management Expense**??
A rent multiplier - ANS-Is the ratio of the price of a real estate investment to its monthly
rental income before expenses***
A rent survey reveals that apartment buildings offering one-bedroom units have a
considerably higher occupancy factor than those with two-bedroom units. If the subject
property includes only units with two bedrooms, the appraisal should probably project -
ANS-a higher vacancy factor than was found for 1 bedroom units**
A small office building sold for $120,000. The monthly net operating income is $1,300
per MONTH. What was the overall capitalization rate? - ANS-V = I / R
V = 120,000
NOI = 1,300 * 12 = 15,600
V = I / R so
R = NOI / V ****
A tenant who has an Exclusive Use Clause with a landlord, where the landlord later
allows a competing tenant in the same shopping center may: - ANS-Exercise the clause
in a lawsuit***
A value range is never: - ANS-wide or narrow***
All of the following lease provisions are advantageous to the lessee except -
ANS-escalation clause**
All of the following relate to the rent level or payment schedule of a lease except: -
ANS-Financing of the Property***
All the following are excluded from the reconstructed operating statement except: -
ANS-• Excluded
o Mortgage loan interest payments, book depreciation, business tax, capital
costs/improvements• Included
o Management charges
o fixed-taxes & insurance
o variable: management, utilities, maintenance
o replacement allowance**
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