Exam 3 Questions

1. If your discount rate is 12%, what would you prefer: 5,000 in 5 years or 10,000 in 9 years?
2. What are the two ways you can finance real estate in Saudi Arabia?
3. What kind of financing occurs when the bank holds the deed until the loan is paid off? 
4. What kind of financing occurs when the bank puts a lien on the deed until the loan is paid off?
5. What are the six elements that appear in a mortgage financing note?
6. Who is in charge of regulating the real estate mortgage market in Saudi Arabia?
7. What is needed to increase trust in the real estate financing market?
8. What is a default?
9. What is the difference between a recourse and a non-recourse loan?
10. Would you prefer a fixed rate or adjustable rate mortgage and why?
11. What is a margin on an adjustable rate loan?
12. What is the difference between possession and title?
13. How can you improve yield on a commercial property investment?
14. Why do we use ratios in real estate analysis?
15. What are the three categories on ratios?
16. What is the internal rate of return?
17. If the NOI multiplier is 15, what is the capitalization rate?
18. What is the building efficiency ratio?
19. How do you calcuate the mortgage constant rate?
20. When do you use leverage ratios?
21. What is the maximum LTV ratio in Saudi Arabia?
22. What is the minimum DCR banks like to see?
23. Can you estimate EGIM without talking to the building owner?
24. What does a LBR of 7.5 mean?
25. If the capitalization rate is 6.0%, what is the NOI multiplier?
26. If the EGIM is 12 and your property has an effective gross income of 100,000 a year, what is your estimate of value?

Assume the following cash flows:

Period	Cash Flow
0	(1,000)
1	100
2	110
3	105
4	112
5	1,050

27. What is the IRR?
28. If you paid 800 instead of 1,000, what would be your IRR?
 
Assume the following cash flows:

1	5,000.00
2	6,000.00
3	5,000.00
4	9,000.00
5	100,000.00

29. What is the maximum you should pay for this property if your target rate was 9.0%?
30. What is the maximum you should pay for this property if your target rate was 7.0%?

Exam 3 Review

Daniel Goodwin Legal Presentation

CH 15 - 18

CH 9 - 14

Exam 3 Preparation 2

Use the following information to answer the following questions:

The asking price is 15,000,000

The gross building area is 3,000 square meters

10 percent of the building is common area.

The potential gross income is 700 per square meter of net leasable area.

The vacancy rate is 10 percent.

The operating expenses are around 800,000 a year.

1. What is the property generating in NOI?

2. What would be the overall capitalization rate?

A bank will loan 60 percent of the price at 5 percent rate amortized over 20 years.

3. What is the equity dividend rate?

4. What is the mortgage constant rate?

5. Will the buyer have positive or negative leverage?

6. If the new owner can reduce vacancy to 5% and reduce operating expenses to 600,000, what will the equity dividend rate be?

Exam 3 Preparation 1

Exam 3 will cover chapters 9, 10, 14, 15, 16, 18, and 19.

Topics include:

Financing
Time Value of Money
PV - Present Value
IRR - Internal Rate of Return
DCF - Discounted Cash Flow
Investment Analysis with Rates and Ratios

PV and IRR

PV and IRR questions

A. Assume the following cash flows:

1. 5,655
2. 4,434
3. 6,000
4. 7,800
5. 80,000

1. What should I pay if my target is an 8.0% rate of return?

2. What should I pay if my target is an 12.0% rate of return?

3. What should I pay if my target is an 10.0% rate of return?


B. Assume the following cash flows:

1. 5,000
2. 6,000
3. 7,000
4. 6,000
5. 90,000

 4. If I paid 100,000, what would be the rate of return?

5. If I paid 70,000, what would be the rate of return?

6. If I paid 50,000, what would be the rate of return?