Real Estate Fundamentals

Real Estate is defined as land and its permanent improvements. Which of the following is an example of an improvement to the land?

sewer system

Real estate is property, which can be either a tangible or an intangible asset. Which of the following would be considered an intangible asset?

mortgage

Which of the following would be considered a tangible asset?

land

If we desire to classify land by its use, land that does not include any improvements to the land would be characterized as:

“raw” land

According to the Department of Agriculture, which of the following land types constitutes the lowest percentage of land use in the US?

urban land

The size of a single family residential lot is typically:

less than one acre

As of 2018, the single largest asset category in the net worth portfolios of household is:

housing

Real estate values derive from the interaction of three different sectors in the economy. Which of the following sectors serves to allocate financial resources among households and firms requiring funds?

capital market

The demand for real estate derives from the need that market participants (e.g., owner occupants, tenants, renters) have for shelter and convenient access to other locations. This competition for physical location and space occurs in the:

user market

Based on your understanding of the supply and demand dynamics of user/space markets, an increase in demand for leasable space would, all else equal, cause which of the following effects?

increase equilibrium rental rates and increase property value

Based on your understanding of the supply and demand dynamics of user/space markets, the new construction of units would, all else equal, cause which of the following effects?

decrease equilibrium rental rates and decrease property value

The expected stream of rental income is capitalized into value by converting expected future cash flows into present value through a process called:

discounted cash flow analysis

Capital markets can be divided into four main categories: private equity, public equity, private debt, and public debt. An example of a real estate asset that trades in the private equity market is:

real property

An example of a real estate asset that trades in the public debt market is:

commercial mortgage backed securities (CMBS)

An example of a real estate asset that trades in the public equity market is:

equity REITs

Primarily through land use controls and property tax policy, which of the following branches of government has the largest influence on real estate values?

local government

Competition for the currently available supply of locations and space coupled with the existing supply of leasable space, determines:

the current level if rental rates for each submarket and property

Each property has unique features, whether it is its age, the building design if its structures, or its location. As such, real estate markets consist of assets that are considered:

heterogenous

Consistently the investment target of pension funds, publicly traded real estate companies, and real estate funds, large companies, and real estate funds, large commercial properties valued well over $10 million are often referred to as:

investment-grade propertyThe

The national government can have a significant impact on the value of real estate through:

income tax policy

Especially in terms of retail properties, which of the following attributes is considered the most likely to result in drastic value differences between otherwise similar properties?

location attributes

Capital markets can be divided into two broad categories: equity interests and debt interests. Equity investors in real estate expect to earn a return on their investment through:

the collection of rent and price appreciation

Considered a fundamental pricing metric in commercial real estate markets, the ratio of a property’s annual net income to its market value is more commonly referred to as a(n):

capitalization rate

A primary determinant of the feasibility of new construction is the relationship between the current level of property prices and the cost of new construction. We would expect the supply of properties to:

increase if current property values are greater than the cost of construction

If a property’s expected annual net income is $89,100 and its current market value is $1,060,000, the property’s capitalization rate is:

8.4%