Real Estate Finance & Investments Exam Questions and Correct Answers Latest Update 2024 (Graded A+)

Real Estate Finance & Investments Exam Questions and Correct Answers Latest Update 2024 (Graded A+) Examples of Risks - Answers operating costs, vacancy, natural disaster, leasing, liquidity Examples of Opportunities - Answers operating costs, terminal value, rental growth What's The "Right" Discount Rate? - Answers conceptually the "right" discount rate to use is always the rate which is reflective of the risk of the anticipated cash flows 2 Factors to Becoming a "Great Real Estate Investor" - Answers 1) understanding why things may fail to go according to plan, and what will happen when this occurs 2) being able to say "no" 2 Notes Related to Market Research - Answers 1) "talk is cheap, but bricks and mortar are very expensive" 2) always extensively drive and walk your market Correlation Across RE, Stocks, Bonds - Answers real estate returns tend to have a relatively low correlation with stocks and bonds SF of 2 BR Suburban Garden Apartment - Answers 900-1,100 SF of 1 BR Suburban Garden Apartment - Answers 650-850 SF of Typical Regional Mall - Answers 750,000-1,250,000 SF of a Strip Mall - Answers 125,000-200,000 SF of an Acre - Answers 43,560 SF of a Small Studio Apartment - Answers 500 SF of One Floor of Large High-Rise Office Building - Answers 15,000-20,000 Greenfield Land - Answers undeveloped land such as a farm or pasture Infill Land - Answers primarily in urban areas, is generally vacant but developed Brownfill Land - Answers parcels of land that had an industrial use and may be environmentally impaired Strip Centers (Anchored vs. Unanchored) - Answers anchored = large retail store that attracts customers to the center. Tend to be larger + require space (supermarkets). 50,000-300,000 SF unanchored range from 10,000-200,000 SF + often include out parcels like fast food restaurants Community Retail Centers - Answers Generally 150,000-350,000 square feet; have several anchors such as a supermarket and a drug store, as well as several specialty stores such as Foot Locker and smaller inline stores; include restaurants to; can be laid out as a single center or as two or three contiguous strip centers; located on local artery roads Power Center - Answers 3-5 major box retailers (Wal-Mart, Home Depot, Fresh Foods, or Staples). Roughly 30,000-200,000 SF Regional Malls - Answers 400,000-2,000,000 SF. Usually 2-6 anchor stores (Marcy's) + big boxes like Barnes & Nobles Warehouse Properties - Answers used for storage. simple physical structures, but they may have demanding specifications. key design issues = clear height for ceilings and the ease of entry and exit of the property Heavy Manufacturing Properties - Answers facilities are generally special purpose properties. more a piece of equipment than a piece of real estate; not many easy alternative uses for the property Light Assembly Properties - Answers combines warehouse, product assembly, and office space, and may hold multiple tenants. *if easily-convertible = flex building (lots of competitive supply) Bulk Warehouses - Answers Very large buildings that range from 50,000-1,000,000 square feet; located near major transportation hubs for ease of truck access; concerned with cubic square footage, as stacking height is critical; must be able to accommodate multiple trucks entering and exiting the building loading docks Central Business District (CBD) Office Space - Answers located in a city's central corridor; loosely classified as Class A, B, or C, but there is no definitive "grading" system Class A Office - Answers relatively new, well located, with modern HVAC systems, modern electrical systems, and quality architecture. "trophy" = top 2-3% of the class A properties "highrises" = floorplates of ~15,000-25,000 SF, 4-8 corner offices per floor Class B Office - Answers less well located, smaller, older, with fewer modern amenities, and of lesser design Class C Office - Answers remainder of office properties Suburban Office Buildings - Answers relatively unique to the US; new midrise structures of around 80,000-400,000 SF (8,000-14,000 SF floorplates) Suburban Garden Apartments - Answers typically 3-4 story wood structures, with 50-400 units, without elevators, and with surface parking; middle units least desirable Midrise Apartments - Answers 5-9 stories, steel framed, and tend to be an urban infill product; have 30-110 units and are elevator serviced Hotels - Answers full service hotels include CBD full service or mid-price point operators. often offer room service, restaurants, banquet space, convention services, and food and beverage services limited service hotels are usually boutique properties; smaller and do not offer the same amenities operating business central component to success; typical contract = owner pays the operator a fixed fee plus a % of gross revenues, as well as a fee for business generated by central reservation system heavy fixed cost operations; location and design important, but value created through superior operation Extended Stay Hotels - Answers larger rooms, small kitchens, and provide limited services; designed for people staying a week or more, and attempt to make guests feel like they are at home Gross vs. Net Leasable - Answers gross square footage refers to the total area of a building, usually measured from inner wall to inner wall, with no deductions for obstructions or non-leasable space