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Free Practice Quiz Question List

7 Real Estate Investment Basics Online Quiz Questions

Use this free practice quiz with 20 questions to review 7 Real Estate Investment Basics, test your knowledge, and prepare for your next test or exam.

20 questions
01
True or false
1 point

True or false: Owning one rental property can concentrate an investor’s exposure in one location, building, and tenant base.

  1. A

    True

  2. B

    False

02
Choose one
1 point

A rental property needs routine repairs and a replacement of its long-lived roof. How should an investor treat these costs when estimating NOI and budgeting for the property?

  1. A

    Include both the routine repairs and the roof replacement as operating expenses.

  2. B

    Include the routine repairs as operating expenses and budget the roof replacement separately.

  3. C

    Include the roof replacement as an operating expense but exclude routine repairs.

  4. D

    Exclude both costs from the investment analysis.

03
Written response
1 point

What is the full term abbreviated as NOI in rental-property analysis?

04
Choose all
1 point

When evaluating a REIT, which factors should an investor review rather than judging the investment only by its stated distributions? Select all that apply.

  1. A

    Its investment structure.

  2. B

    Its fees.

  3. C

    Its risks.

  4. D

    Its disclosures.

  5. E

    Only its stated distributions.

05
Choose one
1 point

A property has annual NOI of $18,000 and costs $240,000. What is its cap rate?

  1. A

    7.5%7.5\%

  2. B

    13.3%13.3\%

  3. C

    75%75\%

  4. D

    0.75%0.75\%

06
True or false
1 point

True or false: Borrowing to finance a rental property can increase potential returns on the investor’s cash, while also increasing risk because loan payments remain due when income falls.

  1. A

    True

  2. B

    False

07
Written response
1 point

A property has annual NOI of $48,000 and annual debt service of $32,000. What is its debt-service coverage ratio?

08
Choose all
1 point

An investor stress-tests a rental-property plan. Which assumptions should they consider changing to less favorable values? Select all that apply.

  1. A

    Lower rental rates.

  2. B

    Lower occupancy or higher vacancy.

  3. C

    Higher operating expenses.

  4. D

    Higher interest costs.

  5. E

    A lower resale value.

09
Choose one
1 point

An investor contributes $90,000 in cash and expects annual pre-tax cash flow of $7,200. What is the cash-on-cash return?

  1. A

    8%8\%

  2. B

    12.5%12.5\%

  3. C

    80%80\%

  4. D

    0.8%0.8\%

10
Choose one
1 point

An investor wants property exposure through a REIT and places importance on being able to buy or sell shares on an exchange. Which statement best informs the choice?

  1. A

    Choose a non-traded REIT because it is generally easier to sell quickly than a publicly traded REIT.

  2. B

    A publicly traded REIT may better fit the need for exchange trading, though the investor should still review its risks and disclosures.

  3. C

    Assume either REIT type can always be sold immediately at a known value.

  4. D

    Choose solely by comparing stated distributions.

11
Open ended
1 point

Explain why a property’s NOI is not the same as the cash remaining after mortgage payments. In your answer, describe what a cap rate measures and why it does not show an investor’s specific financing outcome.

12
True or false
1 point

An investor estimates a rental property's net operating income by subtracting mortgage principal and interest from effective gross income along with operating expenses. Is this method consistent with the definition of NOI?

  1. A

    True

  2. B

    False

13
Choose one
1 point

A rental property has potential gross income of $60{,}000, expected vacancy losses of $4{,}000, credit losses of $1{,}000, and other income of $2{,}000. What is its effective gross income?

  1. A

    $53,000

  2. B

    $57,000

  3. C

    $58,000

  4. D

    $63,000

14
Choose one
1 point

A property could earn $48{,}000 annually at full occupancy. Expected vacancy and credit losses are $3{,}000, other income is $1{,}000, and operating expenses are $16{,}000. What is the property's annual NOI?

  1. A

    $28,000

  2. B

    $29,000

  3. C

    $30,000

  4. D

    $46,000

15
Choose one
1 point

A property has annual NOI of $18{,}000 and a purchase price of $240{,}000. What is its cap rate?

  1. A

    6.0%

  2. B

    7.5%

  3. C

    8.3%

  4. D

    13.3%

16
Choose one
1 point

A rental property has annual NOI of $26{,}000 and scheduled mortgage payments of $19{,}000. Before income taxes and separately budgeted capital costs, how much cash flow remains after debt service?

  1. A

    $7,000

  2. B

    $19,000

  3. C

    $26,000

  4. D

    $45,000

17
Written response
1 point

An investor contributes $120{,}000 and expects annual pre-tax cash flow of $9{,}600. What is the cash-on-cash return? Enter the answer in percentage points; for example, enter 8 for 8%.

18
Written response
1 point

A property has NOI of $31{,}500 and annual debt service of $25{,}200. What is its debt-service coverage ratio? Enter the ratio as a decimal.

19
Fill in the blank
1 point

A property could show a strong current yield, yet a complete comparison over a stated period should evaluate , which includes operating cash received and changes in value less costs.

20
Fill in the blank
1 point

When forecasting dependable rental income for a property, an investor should check comparable rents, lease terms, occupancy, and .