1. The acquisition price of a property is $3,800,000. The loan amount is $2,850,000. If the property NOI is expected to be $225,600, operating expenses $122,500, and annual debt service $199,870, the debt service coverage ratio is approximately equal to:

a) 0.89

b) 1.13

c) 1.84

d) None of the above

2. Which of the following in not considered an operating expense:
   1. Water and Sewer
   2. Real Estate Taxes
   3. Mortgage Payment
   4. Insurance

3. Which of the following property types is often considered to have the most uncertain expected cash flows?

1. Multifamily
2. Office
3. Hotel
4. Land

4. The capitalization rate (cap rate) is an important metric that investors use to analyze the state of commercial real estate markets. When interpreting capitalization rate movements, an increase in capitalization rates over time would indicate that:

1. Borrowers are taking more high-leveraged loans
2. Operating cash flows of properties have been improving
3. Property values have increased
4. Property values have decreased

5. Which statement is true about permanent loans for income producing properties?

1. They often have prepayment penalties
2. They usually include some amortization of the principal amount during the loan term

3. They require a debt service coverage ratio higher than 1:1 relative to the net operating income
4. All of the above

6. Why does a construction loan have more risk to the lender than a permanent loan?

1. The property is not generating cash flows to service the debt
2. Uncertainty about what the demand for the property will be upon completion of construction
3. Uncertainty about when the property will be completed due to a whole host of issues
4. All of the above

Questions 7-11 pertain to the following scenario:

Apton Apartments has a gross income of $100,000 a year and a net operating income of $60,000. Barnes Gardens has the same net operating income as Apton Apartments but has a gross income of $120,000. The capitalization rate is 6% for Apton Apartments and 5% for Barnes Gardens.

Both complexes have the same number of units. (for purposes of the following calculations we are assuming 0% vacancy rates and $0 in capital reserves).

7. Which complex has the lower price per unit?

1. Apton Apartments
2. Barnes Gardens
3. Both the same

8. Which complex has higher operating expenses?

1. Apton Apartments
2. Barnes Gardens
3. Both the same

9. Which complex is worth more?

1. Apton Apartments
2. Barnes Gardens
3. Both the same

10. Assuming a lender will lend based on LTV only, which complex is able to get the larger loan?

1. Apton Apartments
2. Barnes Gardens
3. Both the same

11. Assuming a lender will lend based on both LTV and DSCR, and DSCR is the restricting factor for the maximum loan size, which complex is able to get the larger loan?

1. Apton Apartments
2. Barnes Gardens
3. Both the same

Questions 12-16 pertain to the following scenario:

A property value is $4,000,000, and it has a $3,000,000 loan on it. The annual net operating income is $220,000.

12. What is the capitalization rate? a) 5.00%

b) 5.25%

c) 5.50%

d) 5.75%

13. When its time to refinance, with an interest rate of 4.00% and a 30-year amortization schedule, what is the loan amount the borrower will be able to get based on a 1.25 minimum debt service coverage ratio?

a) $4,400,000

b) $3,000,000

c) $3,072,098

d) $3,071,553

14. When its time to refinance, assuming a future capitalization rate of 5.00%, with an interest rate of 4.00% and a 30-year amortization schedule, what is the loan amount the borrower will be able to get based on a 1.25 minimum debt service coverage ratio and a 75% maximum LTV?

a) $4,400,000

b) $3,000,000

c) $3,072,098

d) $3,071,553

15. Assuming the current interest rate is 3.75% and the amortization schedule is 25 years, the current annual debt service is approximately:

a) $185,100

b) $112,500

c) $150,000

d) $246,800

16. Assuming the current interest rate is 3.75% and the amortization schedule is 25 years, if the borrower invested $1,120,000 of cash equity (including closing costs), the borrowers cash on cash return is approximately:

a) 5.50%

b) 3.12%

c) 2.68%

d) 19.64%

17. When considering a loan, what is the lender looking for as it relates to the sponsorship?

1. Experience in ownership/management of commercial properties
2. Conservative levels of DSCR and LTV throughout the existing portfolio of properties owned by the borrower
3. Good quality credit profile
4. All of the above

18. Once the term sheet is signed and the process leading up to the closing of the loan begins, which third party report takes the longest to prepare and therefore ordered first by the lender?

1. Environmental and Engineering
2. Appraisal
3. Zoning
4. None of the above

19. A developer purchases a piece of land on which (s)he plans to build a 30-unit multifamily building with 4 retail spaces on the ground floor. What type of loan is (s)he most likely to get for the construction period?

1. Short term construction (bridge) floating rate loan
2. 10-year fixed rate loan with a 30-year amortization schedule
3. 5-year fixed rate first mortgage
4. None of the above

20. What are the main points to look for in the term sheet?

1. Loan amount and maximum LTV
2. Interest rate, loan term and prepayment penalty
3. Borrowers experience qualification requirements
4. a and b
5. All of the above