Real Estate Final

What is the term for the possibility that actual outcomes will vary from what was expected when the asset was purchased?

Risk

Unlike many publicly traded stock and bond investments, how do commercial real estate investments primarily generate returns?

dividend income and capital appreciation

Which function is considered a primary responsibility of an asset manager?

maximize value and manage risk

Which function is considered a primary responsibility of a property manager?

Maintaining and operating the property on a day-to-day basis.

What title is given to individuals responsible for decisions that affect the physical, financial, or ownership structure of a property?

property rights

What are brokers or agents called who specialize in helping tenants find suitable space?

tenant reps

In a lease contract, what is the owner called?

Lessor

What is the contract called that transfers exclusive use and possession of a commercial space to the tenant in return for rent?

Lease

In a lease contract, what is the tenant called?

Lessee

What type of maintenance includes day-to-day ordinary repairs like fixing a window or leaky roof?

corrective maintenance

In a management agreement, which responsibility is not typically assigned to the property manager?

Management of financial services

What is the typical asset management fee range based on the market value of assets?

0.5% to 2% of assets under management (AUM)

What type of improvement involves changing a building’s layout or style to fix functional or economic issues?

Renovation

When someone shops at a department store and is drawn to a nearby shoe store, what real estate concept does this scenario illustrate?

proximity principle

A lease is signed for 10 years at $5,000/month with a 3% commission. What is the total commission?

$15,000.

A lease is signed for 25 years at $3,000/month with a 5% commission. What is the total commission?

$3,750

Calculate the rent-to-income ratio for a tenant making $45,000 annually with monthly rent of $1,000.

3.75

Given a property’s potential gross income of $250,000, vacancy loss of 15%, and miscellaneous income of $50,000, calculate the 3% management fee.

$7,875

What is the first step in the development process, often considered the “entry ticket to development”?

establishing site control

Which method of securing site control requires only initial land rent before development begins?

Ground lease

How is an architect typically compensated for pre-design or schematic work?

Percentage of the total project cost

What is the typical design-phase compensation range (as a percentage of construction cost) for moderately complex designs?

6-10%

What is the typical compensation range for simple garden apartment designs?

5-7%

Who is primarily responsible for site aesthetics, traffic flow, utilities, and drainage?

developer

What is often the single greatest cause of delays and cost overruns in a development project?

Changes in the project scope or design

Where does most land acquisition financing typically come from?

Commercial banks or institutional lenders (private)

What type of development cost includes legal fees and permit processing?

Soft costs

What is the primary risk faced after construction is completed?

operational or income risks

In mezzanine financing, what is typically pledged as collateral?

Equity in the borrowing entity

Who acts as the developer’s representative on the construction site?

Construction manager

What term refers to contractors responsible for specialized construction tasks like HVAC installation?

construction manager

What is the arrangement called where architect and contractor roles are combined to reduce design-cost conflict?

design-build

Which of the following is least likely to be involved in the design stage: general contractor, landscape architect, civil engineer, or land planner?

general contractor

In how much time does a construction lender typically expect the loan to be repaid?

12-36 months

What government document certifies that a building is ready for occupancy?

certificate of occupancy

What type of feasibility analysis typically begins the second stage of development?

market feasibility

When should a broker ideally be brought into the development process?

Preliminary design phase

What type of engineer determines the structure’s skeleton and load-bearing elements?

structural engineer

What engineer designs HVAC systems and other building systems?

Mechanical

What engineer designs the building’s electrical systems?

electrical engineer

What is an example of a hard cost in a construction budget?

building materials or labor