Quiz

1. Define the following terms:
a. Time value for money
Time value for money is the concept that the money an individual has presently
has a higher value compared to the money that he or she will have in the future.
b. Discounted cash flow
Discounted cash flow is a valuation method that is used in the process of valuing
an asset.
c. Present value
Present value is the current value of a future sum of money or stream of cash
flows given a specified rate of return
2. Define the following real estate terminologies:
a. Gross lease
Gross lease is the case where the tenant pays the full rent then the landlord pays
the other expenses that are associated with the property
b. Triple net lease
Triple net lease is where the tenant pays the rent in full in addition to the other
expenses that are associated with the building.
c. Modified gross lease
It is an arrangement where both the tenant and the landlord are in charge of paying
the operating costs of the building.

3. Differentiate between reversion and direct capitalization.
Reversion refers to the practice of exchanging the property with money whereas direct
capitalization is a real estate appraisal method that helps in the process of converting
income into value.
4. What are leasing commissions?
Leasing commissions refers to percentage of the value of the property that a broker or
agent receives as payment for the services that he or she has rendered in the sale of
the property.
5. What are the advantages of the tenant improvement allowance?
It can help a tenant to personalize the space and make sure that it meets his or her
standards.
6. What is the mileage rate?
It is the percentage of $1000 of the assessed value of the property that is used in the
generation of the tax bill of the property.
7. What is the difference between gross lease and triple net lease
Gross lease refers to the lease where only one payment is made for the property for
the period that a tenant will be using whereas a triple net lease is the lease where the
tenant will pay the rent in addition to the agreed expenses.
8. What is the difference between the present value and the discount rate?
The present value refers to the current value of a future sum of money or stream of
cash flows given a specified rate of return whereas the discount rate refers to the cost
of capital.

9. What is the difference between Time Value of Money and the Discounted Cash
Flow?
Time value of money refers to the concept that the money someone has now is more
worthy that the same amount in the future whereas the discounted cash flow refers to
the valuation method that is used in measuring the value of a given asset.
10. What is the importance of the future value in real estate?
It is used in estimating the future value of the investment that are being done in the
present.