You are considering a purchase of two practically identical properties. Both properties have and are expected to generate the same net income. Property (1) has a cap rate of 9 while property (2) has a cap rate of 7. It is reasonable to assume that one of the property (1) is overvalued relative to property (2).
True or False?
If you issued a 5/1 adjustable rate mortgage in 2007 that had an interest rate indexed to the Fed Funds rate, then over the last 8 years you experienced a tremendous increase the interest you owed every year.
True or False?
You are trying to decide between financing a home with a 15 year fixed rate mortgage that has a 5% interest rate and a 30 year fixed rate mortgage that has a6.5% interest rate. In both cases you finance $320,000. In both cases the loan requires monthly payments of interest and principal. If your objective is to minimize your monthly payments, you would select the 30 year fixed rate mortgage.
True or False?
You are searching for a commercial property to buy in Brooklyn. You have narrowed your search down to three properties. Property (1) has a cap rate of 7, property (2) has a cap rate of 8, and (property (3) has a cap rate of 6. Property (3) must be the better choice because the cap rate implies that property (3) has the highest net income of the three properties.
True or False?