Solutions to Questions - Chapter 1
An Introduction to Real Estate Investment: Legal Concepts
What is the difference between real estate and real property?
Real estate refers to the physical land and improvements constructed on the land, while
Solutions to Questions - Chapter 13
What is meant by partitioning the internal rate of return? Why is this procedure meaningful?
To illustrate what is meant by partitioning the IRR, remember that the IRR is made up of two compo
Solutions to Questions - Chapter 16
Financing Project Development
What are the sources of risk associated with project development?
Sources of risk associated with project development include market risks and project risks. Market risks are
Solutions to Questions - Chapter 14
Disposition and Renovation of Income Properties
What factors should an investor consider when trying to decide whether to dispose of a property that he has
owned for several years?
The factors are based on
Solutions to Questions - Chapter 18
Partnerships, Joint Ventures, and Syndications
What is the difference between an IRR preference and an IRR lookback?
With an IRR preference the investor receives all additional cash flow from sale (after e
Solutions to Questions - Chapter 17
Financing Land Development Projects
How might land development activities be specialized? Why is this activity different from project development
discussed in the preceding chapter?
Firms can specialize in
Solutions to Questions - Chapter 21
Real Estate Investment Trusts (REITs)
What are the general requirements regarding income, investments, and dividends with which a REIT must comply
to maintain its tax-exempt status?
In general, at least 95
Solutions to Questions - Chapter 19
The Secondary Mortgage Market: Pass-Through Securities
What is the secondary mortgage market? List three reasons why it is important.
The secondary mortgage market is the after market in which mortgages ar
Solutions to Questions - Chapter 12
Financial Leverage and Financing Alternatives
What is financial leverage? Why is a one-year measure of return on investment inadequate in determining
whether positive or negative financial leverage exists?
Solutions to Questions - Chapter 15
Financing Corporate Real Estate
What are the main reasons that corporations may choose to own real estate?
There are a number of reasons a corporation may decide to own (rather than lease) real estate. It
Solutions to Questions - Chapter 11
Investment Analysis and Taxation of Income Properties
What are the primary benefits of investing in real estate income property?
Net Income: Dollars left over after collecting rent and paying expenses but
Solutions to Questions - Chapter 2
Financing: Notes and Mortgages
Distinguish between a mortgage and a note.
A note admits the debt and generally makes the borrower personally liable for the obligation. A mortgage is
usually a separate docume
Solutions to Questions - Chapter 7
Single Family Housing: Pricing, Investment and Tax Considerations
Why is the income approach to value often difficult to use on a single family residential appraisal?
Typically, the income approach is diffic
Solution to Questions - Chapter 8
Underwriting and Financing Residential Properties
What is the legislative intent of federal truth-in-lending disclosures, and what specific disclosures are required
under the act?
The intent of FTL legislatio
Solutions to Questions - Chapter 4
Fixed Rate Mortgage Loans
What are the major differences between the CAM, and CPM loans? What are the advantages to borrowers and risks to
lenders for each? What elements do each of the loans have in common?
Solutions to Questions - Chapter 6
Residential Financial Analysis
Why do points increase the effective interest rate for a mortgage loan more if the loan is held for a shorter time
period than a longer time period?
Points are a one-time charg
Solutions to Questions - Chapter 9
Introduction to Income-Producing Properties: Leases and Market for Space
How does the use of leases shift the risk from lessor to the lessee?
Leases determine how much risk will be borne by the lessor versus
Solution to Questions - Chapter 10
Valuation of Income Properties: Appraisal and the Market for Capital
What is the economic rationale for the cost approach? Under what conditions would the cost approach tend to
give the best value estimate?
Solutions to Questions - Chapter 5
Adjustable Rate and Variable Payment Mortgages
In the previous chapter, significant problems regarding the ability of borrowers to meet mortgage payments and
the evolution of fixed interest rate mortgages wi
Solution to Questions - Chapter 20
The Secondary Mortgage Market: CMOs and Derivative Securities
What is a mortgage pay-through bond (MPTB)? How does it resemble a mortgage-backed bond (MBB)? How
does it differ?
MPTBs are issued against mort