NYS REAL ESTATE EXAM QUESTIONS AND ANSWERS .Buy
Quality Materials
JJ owns a building with 10 small office suites. The rent of each office is $2,000
per month. She averages 20% vacancy and collects $1,000 a year from the
parking meters. What is the potential gross income for JJ's building?
$240,000
Spencer financed the purchase of an office building with a $100,000 down
payment and a $500,000 loan. His NOI is $56,000 and his debt service is $44,000.
What is his cash-on-cash return?
12%
Beth borrowed $300,000 and made a down payment of $50,000 to buy a
warehouse. She has an effective gross income of $68,000, expenses of $8,000,
and an annual debt service of $22,000.
$38,000
Which is not a factor you would need to know to find the capitalization rate?
depreciation
What line item appears at the top of an operating statement?
potential gross income
Gretchen won't invest for less than an 11.5% return on her investment. The
property she's evaluating showed an NOI of $32,000 last year. How much would
Gretchen be willing to spend on this property?
$278,261
Which type of risk is most susceptible to changes in the interest rate?
capital market risk
Cash Flow=
NOI minus Debt Services
Cap Rate=
NOI divided by Value
To find value someone is willing to spend on a property...
Income divided by Rate (%)
Replacement reserves are usually maintained to pay for
capital improvements
The ability to convert an asset to cash quickly at any price is known as
marketability
The ability to convert an asset into cash without the loss of principal is
liquidity
Cash-on-cash calculation is a ratio between
down payment and cash flow
What does an attornment clause in a lease do?
protects the leasehold interest of a person who subleases
Which type of lease separates ownership of land from ownership of
improvements?
ground
Three key parties the real estate investor typically has as part of a transaction are
, accountant, lawyer, real estate sales person
Who is liable if tenant A subleases their space to tenant B and tenant B does not
pay the rent?
tenant A, because they are the one who signed the contract with the landlord
Margie's Candle shop is not doing well at the EastSide Mall location. Margie
wants to close that store but still has a lease. What is NOT an option for her?
attornment
From which organization would a commercial investor most likely seek
assistance?
SBA- small business administration
Which act applies to non-residential commercial properties?
Civil Rights Act of 1866
An amount of money imposed by the co-op board for the transfer of ownership
during the sale of a unit is a
flip tax
What type of ownership is a condominium?
fee simple absolute
Who is responsible for regulating and maintaining the common areas of condos
and co-ops?
the owner's association
A document agreed to by the lender, the co-op, and the shareholder that
recognizes the rights of lenders who finance the shareholder is the
recognition agreement
in the state of New York, a certificate of occupancy is issued by whom?
the Department of Buildings
Who directly oversees the day-to-day duties of a condominium?
managing agent
What is an incentive to owning your own home?
using up to $10,000 from a retirement fund to purchase a home tax free
How do you find net operating income (NOI)?
Subtract vacancy losses from gross income to get effective gross income. Then subtract
expenses to find NOI.
The recovery of the cost of a capital asset over time by expensing a set portion of
it each year is called
depreciation
(calculated to deduct expenses from income)
Which items are tax deductible for a primary residence?
mortgage interest, property taxes, in-home office, interest on a home equity loan,
casualty losses
Juan purchases an office building and one acre of land for $1,000,000. The value
of the land is estimated to be $300,000. He installs a new utility line at a cost of
$10,000. He also installs a new roof at a cost of $50,000. What is the basis of the
building?
$760,000
(subtract value of land and add improvements to the cost)
Quality Materials
JJ owns a building with 10 small office suites. The rent of each office is $2,000
per month. She averages 20% vacancy and collects $1,000 a year from the
parking meters. What is the potential gross income for JJ's building?
$240,000
Spencer financed the purchase of an office building with a $100,000 down
payment and a $500,000 loan. His NOI is $56,000 and his debt service is $44,000.
What is his cash-on-cash return?
12%
Beth borrowed $300,000 and made a down payment of $50,000 to buy a
warehouse. She has an effective gross income of $68,000, expenses of $8,000,
and an annual debt service of $22,000.
$38,000
Which is not a factor you would need to know to find the capitalization rate?
depreciation
What line item appears at the top of an operating statement?
potential gross income
Gretchen won't invest for less than an 11.5% return on her investment. The
property she's evaluating showed an NOI of $32,000 last year. How much would
Gretchen be willing to spend on this property?
$278,261
Which type of risk is most susceptible to changes in the interest rate?
capital market risk
Cash Flow=
NOI minus Debt Services
Cap Rate=
NOI divided by Value
To find value someone is willing to spend on a property...
Income divided by Rate (%)
Replacement reserves are usually maintained to pay for
capital improvements
The ability to convert an asset to cash quickly at any price is known as
marketability
The ability to convert an asset into cash without the loss of principal is
liquidity
Cash-on-cash calculation is a ratio between
down payment and cash flow
What does an attornment clause in a lease do?
protects the leasehold interest of a person who subleases
Which type of lease separates ownership of land from ownership of
improvements?
ground
Three key parties the real estate investor typically has as part of a transaction are
, accountant, lawyer, real estate sales person
Who is liable if tenant A subleases their space to tenant B and tenant B does not
pay the rent?
tenant A, because they are the one who signed the contract with the landlord
Margie's Candle shop is not doing well at the EastSide Mall location. Margie
wants to close that store but still has a lease. What is NOT an option for her?
attornment
From which organization would a commercial investor most likely seek
assistance?
SBA- small business administration
Which act applies to non-residential commercial properties?
Civil Rights Act of 1866
An amount of money imposed by the co-op board for the transfer of ownership
during the sale of a unit is a
flip tax
What type of ownership is a condominium?
fee simple absolute
Who is responsible for regulating and maintaining the common areas of condos
and co-ops?
the owner's association
A document agreed to by the lender, the co-op, and the shareholder that
recognizes the rights of lenders who finance the shareholder is the
recognition agreement
in the state of New York, a certificate of occupancy is issued by whom?
the Department of Buildings
Who directly oversees the day-to-day duties of a condominium?
managing agent
What is an incentive to owning your own home?
using up to $10,000 from a retirement fund to purchase a home tax free
How do you find net operating income (NOI)?
Subtract vacancy losses from gross income to get effective gross income. Then subtract
expenses to find NOI.
The recovery of the cost of a capital asset over time by expensing a set portion of
it each year is called
depreciation
(calculated to deduct expenses from income)
Which items are tax deductible for a primary residence?
mortgage interest, property taxes, in-home office, interest on a home equity loan,
casualty losses
Juan purchases an office building and one acre of land for $1,000,000. The value
of the land is estimated to be $300,000. He installs a new utility line at a cost of
$10,000. He also installs a new roof at a cost of $50,000. What is the basis of the
building?
$760,000
(subtract value of land and add improvements to the cost)
