Real Estate Principles Study Set 1

Business

Quiz 21 :

Enhancing Value Through Ongoing Management

Quiz 21 :

Enhancing Value Through Ongoing Management

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In the real estate asset management/investment advisory business, why has performance-based management replaced, or at least supplemented, the "traditional" scheme for compensating some asset managers
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The practice of compensating asset managers based on the value of net assets managed creates an agency problem because managers have the incentive to acquire and hold assets--rather than maximizing the investor's rate of return. Establishing management compensation based on maximizing the investor's rate of return better aligns the interests of the manager and investor/principal.

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For non-real estate corporations, which of the following is not a potential advantage of a real estate sale-leaseback
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The correct answer is option (c) The firm benefits from property appreciation that occurs after the sale-leaseback.
The sale-leaseback transaction increases a company's financial flexibility by off-loading real estate at attractive long-term rates, while maintaining the availability of bank financing for a future date. By being both the lessee and the seller of the property, a corporation has greater bargaining power to ensure it maintains uninterrupted control of the facilities, including operations, maintenance and alterations; it negotiates the rights to assign and sublet the facilities, as well as enjoys lengthy initial and renewal terms.

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The Institute of Real Estate Management (IREM) awards which of the following designations
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The correct answer is option (b) CPM.
To earn the designation, property managers must have a minimum of five years of full-time decision-making activity in real estate management, take numerous educational courses, and pass a rigorous exam. In addition, CPMs must agree to continuous education to keep their certifications current and abide by the highest standards of professional ethics.

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The following are necessary for a lease to be valid, except:
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A contractual relationship in which an individual must act in the best interests of a principal when dealing with a third party is termed:
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Demolition of an existing property on an urban site will likely occur:
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Remodeling and rehabilitation:
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In what ways are the maintenance and repair decision and the rehabilitation decision similar How do they differ
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Which of these is not typically a responsibility of a property manager
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What should be included as rehabilitation costs to be matched by value added after rehabilitation
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Why is the tenant mix critically important to the performance of shopping center investments
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An investor purchased a property with an equity investment of $100,000 and an $800,000 mortgage. She has held the property for five years, and the mortgage now has a balance of $750,000. The market value of her property is estimated to be $950,000. What is her current equity investment
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Both the owner and the manager may be better off if property management compensation were based on a percentage of the property's:
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What factors can change after rehabilitation of a property to produce a higher "after" rehabilitation value than "before" value
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How is the financial compensation for property managers usually determined What "agency" problem does this seem to create
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The requirement of a real estate property manager to act in the best interests of the landlord when dealing with a tenant is termed:
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Define deferred maintenance and list some examples.
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The asset manager is generally NOT responsible for:
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How does routine maintenance and repair affect a property's performance
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What does the property management agreement accomplish
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