Question

Real Estate

1. What are the four criteria for Highest & Best Use?

A) Legally permissible, physically possible, financially feasible and maximumly productive.

B) Legally permissible, physically possible, financially feasible and minimally impactful on the environment.

C) Bulk Density Limit, Height Restrictive, Landmark accessible, and Usage Specified.

D) Tall, Qualitative Construction, Useful to the Community, and Impactful

2. Regarding Property Setups, they may show basic property data, including all of the following, EXCEPT:

(A) Gross Rent and/or Gross Revenue

(B) Asbestos found in its Roof Tiles

(C) Lot Square Feet

D) Real Estate Taxes

3) A Lease in which the retail tenant pays the base rent and all of the operating expenses of the property is referred to as a:

A. gross lease.

B. percentage lease.

C. triple-net lease.

D. graduated lease.

4. Stabilized NOI on an apartment building is $10 million. The cap rate is 8%. What is the value of the building?

A. $250 million B. $125 million C. $8 million D. $0.8 million

Answer 1

1. The four criteria for Highest & Best Use-

A) Legally permissible, physically possible, financially feasible and maximumly productive.

Explanation-The four criteria that highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity. Physically possible and legally permissible result in a set of reasonably probable wheras financially feasible and maximally productive results in the highest present value to the property.

2. Regarding Property Setups, they may show basic property data, including all of the following, EXCEPT

(B) Asbestos found in its Roof Tiles

3) A Lease in which the retail tenant pays the base rent and all of the operating expenses of the property is referred to as a:

A. gross lease

Explanation-It means that the tenant pays base rent, utilities, and a portion of operating costs. Gross lease means one is responsible for paying the base rent and covers all the building expenses, including maintenance fees, insurance, and real estate taxes

4. Capitalization Rate = Net Operating Income / Current Market Value= $125 million

Explanation-Here Net Operating Income is $10 million or $10,000,000

Cap rate is 8%=0.08

Now,

0.08 = $10,000,000/Current Market Value

Current Market Value*0.08= $10,000,000

Current Market Value=$10,000,000/0.08 =$125,000,000 or $125 million.

Current Market Value=$125 million