Questions and Answers of Real Estate Principles

Explain the reporting requirements of an authority engaged only in business-type activity.
Which special-purpose government financial reports must include a statement of cash flows?a. Govemments engaged only in governmental activities.h. Governments engaged only in business-type
Which special-purpose government financial reports must include an MD&A?a. Governments engaged only in governmental activities.b. Governments engaged only in business-type activities.c. Governments
Which set of fund financial statements would normally contain a reconciliation of the fund financial statement information to the government-wide financial statements?Governmental.h. Proprietary..
Which fund financial statements are required for governmental funds?1 Balance sheet.b. Statement of revenues, expenditures, and changes in fund balances.c. Budgetary comparison statement for all
Which statement is NOT accurate?a. Major fund reporting is required for all proprietary funds.b. The General Fund is always major.c. Major fund reporting is required for all governmental funds ..d. A
Which fund must always be reported in a separate column in the fund financial statements?a. Capital Projects Fund.b. Dehe Service Fund.c. General Fund.d. Enterprise Fund
In the fund financial statements, a government should include a separate column, except for which major fund?a. Each major Enterprise Fund.b. Each major Internal Service Fund.c. Each major Capital
Separate sets of fund financial statements are prepared for which fund category?a Fiduciary.h. Govemmental:c. Proprietary.d. All of the above.
Which investment must be reported at fair value?2. A 9-month negotiable certificate of deposit.b. A 3-year nonnegotiable certificate of deposit.c. A 2-year corporate bond.d. All of the above.
The county received a restricted grant from the state government to be used to train police officers.The county has met all eligibility requirements of the grant, but will not expend the money until
A city levies property taxes of $100,000, 1 percent of which are expected to prove uncollectible. The city should record this transaction as which of the following?a. Revenues of $99,000 and no
Under the modified accrual basis of accounting, revenues are considered susceptible to accrual if they are which of the following?2. Measurable.h. Available.c. Earned.d. Both a and b.
Fines and forfeitures are an example of which category of nonexchange transactions?2. Derived tax revenue.b. Imposed nonexchange revenue.c. Govemment mandated nonexchange revenue.d. Voluntary
Income taxes are an example of which category of nonexchange transactions?a. Derived tax revenue.b. Imposed nonexchange revenue.c. Govemment mandated nonexchange revenue.d. Voluntary nonexchange
The General Fund pays resources to a Capital Projects Fund. These resources will not be repaid.This transaction is an example of an interfunda. Transfer.b. Services provided and used transaction.c.
Proprietary funds recognize which of the following?a. Revenues and gains.b. Expenditures and losses.c. Expenses and losses.d. Both (a) and (9.
A Special Revenue Fund would use which basis of accounting?a. Accrual.b. Modified accrual.c. Cash.d. Modified cash.
Which fund type would use the availability criterion for recognizing revernies?a. Capital Projects Funds.b. Debt Service Funds.c. General Fund.d. All of the above.
Which fund type would use the flow of current financial resources measurement focus?a. Private-Purpose Trust Fund.b. Enterprise Fund.c. Capital Project Fund.d. Internal Service Fund.
Which fund type would use the flow of economic resources measurement focus?a. General Fund.b. Debt Service Fund.c. Special Revenue Fund.d. None of the above.
What is a fund category used by governments?Expendable funds.Current funds.Plant funds.d. Proprietary funds.
Which characteristic used to determine if an organization is a government can be rebutted based on compelling, relevant evidence?a. The majority of governing board members are appointed by government
What is a key accounting difference for state and local governments?a. Budget reporting.b. Measurement focus and basis of accounting.c. Fund accounting.d. All of the above.
Who is a primary user of government financial reports?a. The citizenry.h. Legislative and oversight bodies.c. Investors and creditors.d. All of the above.
What is NOT a financial reporting objective of state and local government?a. Comparing actual results to budget.h. Assessing cash flows.c. Assessing results of operations.d. Assisting in the
What is a characteristic that distinguishes government from business enterprises?a. Organizational purposes.b. Sources of reverdes.c. Role of the budget.d. All of the above.
4. What is the replacement cost per square foot or meter?
3. What does the building cost per square foot or meter to buy?
2. What are market rentals in the area?
1. What rent is being achieved in the subject property?
2. Banks are willing to lend you more than you pay for a commercial property, so long as the valuation for mortgage purposes is based on actual rental income divided by market cap rates. They are not
1. Sellers of commercial real estate, their leasing agents, real estate agents, and other investors looking to buy commercial real estate all have this notion that it is difficult to find tenants for
What is more, if this residential property was vacant when you bought it, you cannot claim that you got it for a song because it was vacant, and that as soon as you get a tenant in it, it will be
Who Wants to Run a Funeral Business?
2. Banks tend to offer a much lower loan to value (LTV) on commercial real estate, meaning you need a higher proportion of the purchase price in cash
1. It is generally much harder to find a tenant for a commercial property.
8. You have reduced management overhead
7. There is less government interference.
6. The tenants earn their income on your property.
5. When you pay for a renovation, the tenants pay you an increased rent.
4. The tenants renovate the building at their cost
3. The tenants pay the outgoings.
2. You have assignment-of-lease protection.
1. Leases are longer term.
The authors lay out some potential scenarios that may affect developers in the future. What others might occur? How would they affect cities, development, and the real estate profession?
The authors offer advice to read as widely as possible and talk to as many kinds of people as possible. Why would it be beneficial to follow that advice? Are there any possible pitfalls?
How do the lifestyles of baby boomers and Gen Y differ? How are they influencing trends in real estate?
How has the trend toward privatization of services affected developers?
How can looking at the past help us to think about the future?
Why is real estate such an important asset to corporations?
What issues does the property management contract spell out?
Why is it so important to create a realistic and accurate operating budget?
What are the four main elements of a strategic plan? Discuss each one.
What are some potential problems facing asset managers, even in good markets?
Why is the involvement of property managers early in the development process important?
How does the property management team use a management plan?
Describe the differences between the property, asset, and portfolio management functions and how they are interrelated.
Describe the types of leases and what is included in each.
How do hard and soft considerations interact in the marketing in stage six?
What are the three basic approaches to estimating a marketing budget?
What are the components of the SWOT analysis? What goals does it accomplish?
Describe the marketing team’s role at each stage of the development process.
Describe some of the risks inherent in stage six and some ways to avoid them.
Describe the process of drawing down the construction loan.
Why is appropriate scheduling particularly important for the project manager?
What is the role of the developer in managing the construction process? How does it differ from the role of the project manager?
How does stage six differ from the first five stages?
What occurs in stage five? Why does stage five depend so heavily on decisions made in stage four?
How do allowance items in a construction contract allocate risk?
What are two primary ways in which a developer hires a general contractor?
Describe the contract that a developer signs with an architect and some of the issues that should be negotiated.
What are some types of equity investment vehicles?
What is mezzanine financing, and why is it usually considered expensive money?
What is the difference between the risks taken by a construction lender and those taken by a permanent lender?
What are some financing options for developers who do not have permanent financing committed before construction begins?
Broadly describe how contracts help control risk.
Discuss the enterprise concept and the impact it can have on the type of space that is developed.
Describe some of the techniques that can be used to control risk during stage three.
How and why do construction contingencies change?
How do developers know whether general contractors’ estimates of construction costs are appropriate?
What is the role of the architect at this stage of the development process?
What are the essential elements of a feasibility study?
What is a feasibility study, and why is it necessary for a development?
Define feasibility.
How can developers control risk during stage two?
What are market segmentation and product differentiation? Why are they important in the real estate development planning process?
What services can architects provide to developers at this stage of the development process?
What issues do developers face when they find a site that meets their initial criteria but that has not yet been subjected to a thorough feasibility analysis?
Describe some of the key concepts involved in site selection and how developers go about assessing potential sites.
How does financial modeling facilitate loan negotiation?
Who decides the capital structure of a development?
What are capital expenditures, and why are they usually not included as an expense in the calculation of NOI?
What are the six steps in underwriting a commercial loan? Why is each important?
What are the primary ratios that commercial property lenders use? What risks does each ratio assess?
What is the most difficult part of DCF analysis?
What is a capitalization rate, and how is it used to value commercial real estate?
What is an expense stop, and how is it used in gross, modified gross, and net leases?
Discuss the three ways that property owners escalate tenant rents in multiyear leases.
What are the primary differences in risk between a construction loan and a permanent loan from the lender’s perspective?

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