Question 1

While they require very specialized information, farm loans are based on the same three legs as all mortgage loans, which are:

Accepted Answer

The three legs of all mortgage loans are a creditworthy borrower, adequate collateral, and income sufficient to repay the loan. The same applies to farm loans, with the addition that the income is dependent on the success of the crops or livestock. Therefore, the best choice is D, creditworthy borrower, adequate collateral, income sufficient to repay the loan.

Question 2

The important reason that shopping center land loads encourage promotions of their tenant's sales is that:

Accepted Answer

Shopping center leases are typically based on a percentage of the tenant's sales, known as percentage rent. The more the tenant sells, the higher the landlord's rent. Therefore, promoting the tenant's sales is in the landlord's best interest.

Question 3

Depreciation allowed for tax purposes is a percentage of the:

Accepted Answer

Depreciation for tax purposes is allowed only on buildings and not on land. Therefore, the depreciation is calculated as a percentage of the total value of the building, which excludes the value of the land.

Question 4

In the financing of special purpose buildings, if a manufacturer agrees to accept contingent responsibility for repayment of a loan made to a dealership, one way this can be accomplished is for the manufacturer to:

Accepted Answer

If a manufacturer agrees to accept contingent responsibility for repayment of a loan made to a dealership, one way this can be accomplished is for the manufacturer to endorse the note. This means that the manufacturer is legally obligated to pay the loan if the dealership defaults on their payments. Options B and C are not necessarily the only ways for a manufacturer to accept contingent responsibility and are not always feasible solutions.

Question 5

Which of the following is true of percentage leases?

Accepted Answer

Percentage leases have a varying percentage charged based on the type of business. Shopping centers may have a standard percentage rate for tenants, but this is not true for all percentage leases. It is not guaranteed that all percentage leases allow for an annual change in percentage charged. While percentage leases may be used for warehouse space, it is not the dominant method.

Question 6

A stabilized income property is one in which the building has a longer operating history and is usually has a _____% or higher occupancy and is for sale by its current owner for varying reasons.

Accepted Answer

A stabilized income property typically has a higher occupancy rate, typically 85% or higher. This indicates that the property is generating steady income and has a history of successful operation.

Question 7

The least amount of management is needed for operating:

Accepted Answer

The answer of The least amount of management is needed...

Question 8

Multifamily housing must comply with a 1988 amendment to Fair Housing Act that adds which of the following to the prohibition against discrimination?

Accepted Answer

The 1988 amendment to the Fair Housing Act adds familial status and handicapped persons to the prohibition against discrimination, meaning multifamily housing must comply with these requirements. Pets and other personality, elderly persons, citizenship, and employment are not specifically protected classes under the Fair Housing Act.

Question 9

When seeking funding which of the following is not one kinds of information that a religious institution facilities lender might feel was key?

Accepted Answer

Lenders typically focus on the financial health and stability of the institution as a whole rather than the personal financial information of its staff. Information like attendance, contributions, and funds directly relate to the institution's ability to repay a loan, whereas individual salaries do not.

Question 10

A "net lease" means which of the following?

Accepted Answer

In a net lease, the tenant is responsible for paying not only the base rent but also a portion or all of the property's operating expenses, which can include maintenance, building insurance, and property taxes. This type of lease shifts the financial responsibility for these expenses from the landlord to the tenant.

Question 11

One of the better ways to assure success with a high rise office building investment is to:

Accepted Answer

Preleasing as much space as possible, preferably to a major tenant, will ensure a steady stream of income even before the building is completed. This will reduce the risk of the investment and increase the chances of success. Picking a suitable location and obtaining the best financing are also important factors, but preleasing is the most crucial. Requiring the building contractor to be bonded is also important, but it is more of a precautionary measure rather than a guarantee of success.

Question 12

In analysis of a property's income and expense, the calculation of each item as a percentage of the gross operating income helps an analyst to:

Accepted Answer

By calculating each item as a percentage of the gross operating income, an analyst can more accurately compare the income and expenses of a property with those of other similar properties. This helps to provide a standardized way of comparing properties and making informed investment decisions.

Quiz 12: Commercial Building and Farm Loans