1. Phase 3 Exam Chapters 15, 18, 19, 20, 22 Fall 2017
FIN 331 Real Estate
Phase 3 Exam
Chapters 15, 18, 19, 20, 22
Fall 2017

2. Chapter 15 Mortgage Cost Calculations
What is earnest money? Does it affect borrowing costs?
What costs must be considered in computing the APR required by the TILA?
How do points affect the lender’s yield?
What is one of the relevant criteria for selecting a mortgage?
What are balloon payments? How do they affect mortgage payments?
How do adjustable rate mortgages work?
Be able to compute: max borrowing amount, monthly payments, lender’s yield, Effective Borrowing costs, balances.

3. Chapter 18 Investment Decisions: Ratios
Know what is meant by;
Operating Expense Ratio
Loan-to-Value Ratio
Debt Coverage ratio
Net Income Mult., Effective Gross Income Mult.
Capitalization Rate
Why do real estate investors prefer using leverage?
How does above the line and below the line treatment of CAPEX affect NOI?
How are capital expenditures related to value?

4. Chapter 19 Investment Decisions: NPV and IRR
RE investments are subject to the same value analysis as other types of investments: Net Present Value
What are the decision rules for NPV?
How does leverage affect ROE?
Computing NPV

5. Chapter 20 Income Taxation and Value
What are the objectives of taxation?
What are the four Classifications of property?
How does the form of ownership affect taxation?
Which types of property can be depreciated?
What are some advantages of LLC’s?
How advantages does Tenancy-in-Common confer on the owners?
Give some examples of direct and indirect ownership
What types of income are subject to Federal taxes?
What are Passive Activity Losses and how do they affect tax liabilities?
How is depreciable basis established?
What tax advantage do Like-Kind exchanges have?

6. Chapter 22 Leases and Property Types
What are some of the essential elements in a lease agreement?
What is an anchor tenant?
When does a tenant get quiet enjoyment?
How are commercial rents quoted?
What is a graduated rent?
When would a tenant most likely get a concession?