Reading 74: Alternative Investments-LOS d 习题精选 2011, investment, following, through, center

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Session 18: Alternative Investments
Reading 74: Alternative Investments

LOS d: Describe the forms of real estate investment and explain their characteristics as an investable asset class.

 

 

Investors can diversify their direct real estate holdings through all of the following vehicles EXCEPT:

A) co-operative shares.

B) commingled funds.

C) limited partnerships.

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Real estate co-operatives are generally a tool with which multiple owners can purchase shares in a single building or complex. This strategy spreads out risk among many investors but doesn’t offer much in the way of diversification for a single investor. Commingled funds and limited partnerships typically allow investors to spread their bets either geographically or through different property types.

[此贴子已经被作者于2011-4-2 11:27:09编辑过]

luqian55

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Which of the following least likely affects a property’s investment potential?

A) Structure of the financing mechanisms used to buy the property.

B) The legal rights associated with the property.

C) The activity around the property, both commercial and non-commercial.

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The financing and investing decisions are made separately. Market value analysis does not consider how the asset will be financed.

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Which of the following statements regarding real estate valuation is CORRECT?

A) The estimated market value of a property depends upon the particular investor.

B) Each property is unique, so the investment value may be dependent upon the particular use planned for the property.

C) The most reliable real estate valuation method is the cost approach.

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The market value is completely independent of any considerations based upon the investor or potential investor. There is not a “most reliable” valuation method – all have their advantages and disadvantages. The investment value may be dependent upon the planned use of the property—remember that market value and investment value are two different things.

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Which of the following is least likely to be a form of real estate investment?

A) Aggregation vehicles.

B) Property insurance.

C) Leveraged equity position.

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Property insurance is not considered a category of real estate investment because the underlying real estate does not revert to the insurer if the property holder allows the policy to lapse. A leveraged equity position and aggregation vehicles such as real estate investment trusts are each forms of real estate investment.

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Demand for real estate is a function of all of the following factors EXCEPT?

A) Competitive properties.

B) Population characteristics of the community.

C) The terms and conditions of mortgage financing.

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This is a determinant of the supply of real estate property. Both remaining choices are determinants of demand.

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Define the sales comparison method and the cost approach.

Sales comparison

Cost approach

A) uses the price of a similar property or properties from recent transactions to value real estate links the value of a property to an investor's specific marginal tax rate

B) uses a discounted cash flow model to estimate the present value of the future income produced by the property links the value of a property to an investor's specific marginal tax rate

C) uses the price of a similar property or properties from recent transactions to value real estate the value of real estate is determined by the replacement cost of improvements, plus an estimate for the value of the land

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The sales comparison method values property relative to similar properties that have been recently sold. The cost approach values a property at the cost it would be to rebuild it.

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Mortgages are considered to be a form of real estate investment because:

A) the investor receives a constant stream of cash flows.

B) if the borrower defaults on the loan, the lender may end up owning the property.

C) the borrower will own the property at the end of the loan term.

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It is true that the borrower will own the property if all loan terms are met, but the question is stated in terms of the mortgage lender, not the borrower. The investor anticipates a constant stream of cash flows, similar to other fixed income investments, but is also subject to defaults as well as prepayments. If the borrower defaults on the terms of the loan, the property will revert back to the lender, and this exposure is the reason why mortgages are considered a real estate investment.