CHAPTER 8-9

Fin 180
Erica Mendoza
Chapter 8

1. Which of the following is part of the ordinances enforceable through the exercise of police powers?
A. Materials
B. Construction
C. Design
D. Occupancy
E. All of the above. ANSWER E
2. Which of the following defines an analysis which aims to estimate how much of the total demand in a competitive market can be captured by a particular property.
A. Takeout loan commitment
B. Marketability Study
C. Certificate of occupancy
D. Construction loan commitment
E. None of the above. ANSWER B
3. Which of the following defines that economic and locational environment in which a particular property competes and trades.
A. Competitive market
B. Permitting
C. Productivity analysis
D. Precommitment ANSWER A
4. A takeout loan commitment is a commitment made b a permanent lender to extinguish the collateral interest a construction lender has in a real estate property by loaning the funds used by the developer to pay off the construction loan? TRUE
5. Is the process of obtaining the necessary government permits to begin and sustain a construction project a general contractor? FALSE
6. A bridge loan is also known as the gap loan? TRUE
7. A construction loan is a long-term loan issued by a developer to fund the construction stage of a project? FALSE Short-term
8. Developers are eager to avoid early commitment to their projects in the beginning? TRUE

Chapter 9

1. Which of the following defines the risk that the investor cannot sell and convert the real estate investment into cash?
A. Leverage
B. Investing
C. Cash Flow
D. Liquidity risk
E. None of the Above. ANSWER D
2. In step four which of the following is not used to obtain the before-tax equity?
A. Less selling Costs
B. Less loan balance
C. Future sale price
D. Net proceeds from sale
E. All of the above. ANSWER E

3. In step 2 which of the following is not part of the taxable income?
A. Plus reserves
B. Less depreciation (S/L)
C. Taxable income
D. NOI
E. Less operating expenses, part of step 1. ANSWER E

4. The increase in asset value over a certain period is called appreciation? TRUE
5. A business or market risk is the risk that business or market conditions may change unexpectedly and unfavorably, reducing the investor’s return? TRUE
6. The spread is the likelihood of an occurrence of an unwanted event? FALSE (RISK)
7. A reduction usually mortgage interest and tax depreciation for real estate investments, in taxable income is the tax shelter? TRUE
8. Management risk is the reduction or amortization of the mortgage balance over time? FALSE (Mortgage Reduction)