Project #60349 - Real State Test

REE 4956 International Real Estate, FIU Spring 2015, Prof. Eileen Cardelle

Name__________________________     Panther Id.________________________

The following is a take home Midterm Exam with 20 questions on course materials covered to date.  The Midterm accounts for 50% of your course grade.

The test must be TYPED in a Word formatted document and returned by email to ecardell@fiu.edu  “before the beginning” of the October 13th Wednesday class.  The email subject line should read “YOUR NAME- REE 4956 Midterm.”  You will also be required to provide a TYPED paper copy at the beginning of next week’s class.

The readability is your responsibility and will contribute towards your exam grade.  You are not to communicate in anyway the exam questions/materials/answers with your classmates.  Failure to follow these instructions and turning the test in by the required deadline will result in a reduction from your course grade.

Read the questions below carefully and pay attention to the details in the questions to ensure the correct answers.  Also, pay close attention to your calculator set up and keystrokes.  For questions #1-5 below (2 pts each) you need to show your work with calculator keystrokes and display an enhanced Time Value of Money TVM line with your variables and answer for each question, if you do not show variables/timelines points will be deducted.  Best wishes……

1.     What is the payment on a \$2,500,000 mortgage financed for 20 years @ 5 3/4%?  Assume monthly compounding.

2.     What is the payment on a \$500,000 mortgage financed for 30 years @ 4%?  Assume monthly compounding.

3.     If you originated a \$200,000 @ 5 1/2%, compounded monthly, for 30 years, what amount of monthly payment on your part will allow you to have a balance of \$75,000 in 10 years?

4.     What is the value today of a single cash flow that will occur 10 years from today?  Assume Cash Flow to occur in ten years is CF10 = \$50,000 and the annual discount rate is 7%.

5.     What is the present value of the following series of cash flows:  \$5,000 per year for 5 years @ 8% assume annual compounding.

Page 1 of 4

Name_____________________

6.     NOI, Net Operating Income is the investor’s ‘annualized’ PGI Potential Gross Income less V/C Vacancy and Collection Loses, plus MI Miscellaneous Income, less O/E Operating Expenses, less Capx Capital Expenditures.  If you have an investment property with a \$1,500,000 annual PGI and 5% annual V/C, no MI, and \$54,416.67 monthly in O/E and no Capx, what would be the property NOI? You must show your process and calculations.  Remember to annualize.(7 pts)

7.     NOI is the income in IRV (Income, Rate, and Value) as the PV of a perpetuity in practice, IRV is traditionally employed to estimate property value.

Where V represents property value,  I  represents  Net Operating Income, and R r represents the Capitalization Rate (Cap Rate).  Notice,  and , resulting in .  So, IRV is really just the present value of a perpetuity:

Assume cap rate (R) for comparable property is 7% and net operating income I is \$920,000.  Both are annualized figures.  State the estimated property value of the building by way of IRV by showing and explaining your calculations. (5 pts)

The following five questions #8, 9, 10, 11 & 12 (each is 12 pts) will account for a total of 60 points, pay attention to good expressive and grammatical language.  Do not be redundant and answer succinctly in approximately 50 words for each question.  You need to explain, quote (properly set up the quote), paraphrase and reference the academic articles assigned in class with the article title, date, author, and publication name to support your answers, otherwise you will be deducted points. Tip, you can find the articles in Blackboard, course content, reading list.

QUESTIONS BELOW ARE WORTH 12 PTS EACH:

8.     Explain why considering investing in international real estate is a prudent for an investor’s portfolio.

9.     Describe the risks to be considered and ways to minimize these risks when investing in international real estate.

10.   Explain what is old and what is new about investing in International Real Estate.

11.   State a major ‘difference’ between investing in Stocks versus Real Estate.

12.  What percentage of a portfolio is recommended to be allocated to international real estate?

Explain your answer with supportive data from the articles.

Make sure you properly referenced the articles for your answers in problems #8-12.

Page 2 of 4

Name_________________

#13-18 multiple choice questions (2 pts each). Place an “X” next to the ‘best’ correct answer.  The topics have been reviewed in class and in the PPTs, see Blackboard.

13.  Real estate is property, which can be either a tangible or an intangible asset. Which of the following would be considered an intangible asset?
A. Land
B. Building
C. Mortgage
D. Motor home

14.   As of 2008, the single largest asset category in the net worth portfolios of households is:
A. government and corporate bonds
B. stocks and mutual fund shares
C. consumer durable goods
D. housing

15.  Which of the following types of liens is automatically superior to any other lien?
A. Property tax and assessment lien
B. Mortgage lien
C. Lien arising from a court judgment unrelated to ownership of the property
D. Mechanics' lien

16.   A deed is a special form of written contract used to convey a permanent interest in real property. Unlike most contracts, a deed requires:
A. both parties to be legally competent and of legal majority age.
B. only the grantee to be legally competent and of legal majority age.
C. only the grantor to be legally competent and of legal majority age.
D. both parties to make promises to perform.

17.   Real estate taxes represent the largest single source of revenue for a large portion of local governments. Most property taxes are applied in relation to the value of the property, or in other words, they are:
A. effective tax rates
B. ad valorem taxes
C. tax-exempt
D. regressive

Page 3 of 4

Name____________________

18.  Cities such as New York are able to host a variety of complex industries because of the development of specialized resources that support their growth. When specialized resources emerge in response to demand from multiple industries, this is referred to as:
A. industry economies of scale
B. agglomeration economies
C. location quotient

19.  When using the net operating income and capitalization approach toward calculating the value of a property (IRV), capitalization rates and property prices/values are _________________ related (this is discussed in one of your modules in course content blackboard and we discussed it in class.

Answer #20 A and B briefly in a few sentences (total 4 pts for 20 A and B).

20.  A. What are some of the indices, reports and websites available for an investor to research as an initial research consideration for international real estate? What parameters of comparison would be important to an investor when considering the various countries? We have discussed these in class.

B.    How has technology impacted real estate globalization?

Thank you!

 Subject Business Due By (Pacific Time) 03/03/2015 12:00 am
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