Real Estate Finance Quiz

Step 1 of 6

16%

You want to acquire an office building with a stabilized net operating income of $80,000. The building has a purchase price of $1,000,000. Your lender said for this particular property they could make a loan based on the lesser of a 75% loan to value ratio or a 1.20x debt service coverage ratio, with an interest rate of 6% and a 20 year amortization. What is the maximum loan amount you can get from this lender?*
- $675,551
- $815,215
- $750,000
- $775,448
- I don't know

A property is expected to generate cash flows at the end of each year for the next 5 years of $35,000, $37,000, $45,000, $46,000, and $40,000. In addition, at the end of the fifth year the expected net sale proceeds are $450,000. If you pay $400,000 to acquire this property, what is the internal rate of return on this set of cash flows?*
- 11.35%
- 13.14%
- 12.00%
- 15.25%
- I don't know

You are a landlord and want to figure out the value of a potential lease. The lease is for 10,000 square feet with a term of 5 years at a rate of $15 per square foot per year, payable at the beginning of each month. All expenses are paid by the tenant. In order to sign this lease you will need to pay $50,000 upfront in tenant improvements and another $40,000 in leasing commissions. What is the value of the lease assuming a 5% discount rate?*
- $645,807
- $715,487
- $575,143
- $597,564
- I don't know

Suppose you bought a building for $100,000 that is expected to generate cash flows at the end of each year for the next 5 years of $18,000, -$50,000, $25,000, $35,000, and $225,000. Note that in year two there is a negative cash flow of $50,000 for a capital expenditure. If your finance rate is 5% and your reinvestment rate is 10%, what is your modified internal rate of return on this set of cash flows?*
- 16.29%
- 17.10%
- 20.49%
- 19.33%
- I don't know

You want to figure out an appropriate market based cap rate for a property, but there aren’t any recent comparable sales to use. However, in a survey of local lenders you find out you can get a loan for this property at a 75% loan to value ratio, amortized over 20 years at a rate of 6%. You also find that local investors would on average require a 12% cash on cash rate of return for investing in a property like the one you are evaluating. Using this information, calculate an appropriate market based cap rate.*
- 7.25%
- 9.45%
- 5.75%
- 7.50%
- I don't know

You've finished the quiz
To get your results and our detailed explanations, just let us know where to send them.
Name*
First Last
Email*