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Real Estate Investment Skills Test
Please allow 15-30 minutes to answer all questions.
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English (US)
1
Question 1
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An investment property sold for $5 million at at 6.1% cap rate. The investor put 25% down, and took out a 30-year loan for the balance at an interest rate of 4.5%.
What is the investor’s cash-on-cash return on this investment?
5.96%
6.16%
6.46%
I don't know
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2
Question 2
The price of a property is $1,200,000. The NOI is $90,000 and the seller will carry a note at 5% interest-only.
After how many years will the buyer have doubled his equity from principal paydown?
10 years
15 years
Never
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3
Question 3
An investor secured a $3,875,000 loan at 5.2% with monthly payments amortized over 30 years. Five years later, they want to sell the property and pay off the loan in full. The lender’s prepayment penalty is 3%.
What is the payoff amount?
$3,568,336
$3,601,045
$3,675,386
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4
Question 4
The price of a property is $3,750,000. The LTV is 70%, the interest rate is 7.75%, the amortization schedule is 30 years, and the loan term is 10 years.
What is the balloon payment?
$2,290,743
$2,334,095
$2,645,223
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Question 5
An investor buys a property for $4.35 million at a 6.0% cap rate. They are able to secure a loan with a debt service coverage ratio of 1.25 and an interest rate of 4.75% amortized over 30 years.
What is the investor’s cash-on-cash return in the first year?
5.22%
5.96%
6.48%
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6
Question 6
The NOI of a property is $245,000. The cap rate is 7%. The LTV is 80%. The interest rate is 6.75%. The loan term is 7 years and the amortization is 30 years.
What will be the balloon payment at maturity?
$2,334,095
$2,542,049
$2,918,430
I don't know
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7
Question 7
A property is selling for $2,950,000 that has a SGI of $373,000. The current vacancy is 11%, and the expenses total $178,913.
What is the cap rate?
4.58%
5.19%
6.04%
I don't know
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8
Question 8
An investor is buying a property for $7,000,000 at a 7.5% CAP. The debt service coverage ratio is 1.3, the term is 25 years, and the interest rate is 5.875%.
What is the investor’s maximum loan amount?
$5,285,816
$5,445,721
$5,603,392
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9
Question 9
A commercial property has a GRM of 12.2. The contract price is $2,837,720. Expenses are 35% of SGI and vacancy is 3%. The debt service coverage ratio is 1.15, the amortization is 30 yrs, and the interest rate is 5.5%.
What is the maximum loan amount on this property?
$1,840,498
$1,974,872
$2,012,998
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10
Question 10
A property is selling for $6,950,000 that has a SGI of $673,000. The current vacancy is 8%, and the expenses total $278,913.
What is the cap rate?
4.60%
4.75%
4.90%
I don't know
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11
Question 11
A buyer on a property wants a cash-on-cash return of 8% on in-place income on day 1. The loan obtainable is for $3,825,000 at 6.25% and a 25 year term. The property’s NOI is $502,788.
What is the most the buyer can pay?
$6,125,000
$6,325,000
$6,575,000
I don't know
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Question 12
A buyer is preparing to write an offer on a property for $4,500,000 and wants to put down only 20%. The best available conventional loan provides for a 70% LTV at 7.5% interest with a 25-year amortization. The buyer asks that the seller carry an interest-only 2nd trust deed for the difference.
What is the maximum the interest rate could be on the 2nd to get the buyer’s total monthly payment to $26,650?
7.99%
8.49%
8.99%
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13
Question 13
An investor acquired a 42-unit property for $6 million at a 6.0% cap rate. During the holding period, they increased the SGI by an average of $128 per unit per month. Vacancy averages 3%. Management fees are 6% and all other operating expenses remain unchanged.
How much appreciation did the investor create if they sold the property at a 5.75% cap rate?
$1,039,845
$1,283,862
$1,552,109
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14
Question 14
An investor secures a 75% LTV loan on an investment property for sale at $4,750,000. The interest rate is 5.5%, the loan is amortized over 25 years, and the loan term is 7 years. The lender charges 2 discount points and $8500 in fees at origination. Four years later, the investor sells the property and pays off the loan with a 2% prepayment penalty.
What was the investor’s actual annual cost of capital on the loan?
5.58%
6.18%
6.58%
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Question 15
An investor bought an apartment complex five years ago for $5.25 million at a 6.5% cap rate. They secured a 75% loan at 4.5% interest amortized over 30 years. Today, the property is operating at a 9.0% cap rate based on the acquisition price, and they are considering selling the property.
What is the investor’s current return on equity?
13.9%
17.8%
20.1%
I don't know
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