Eastdil Secured Practice Test 2025 - Free Practice Questions and Study Guide

The assessment of liquidity in real estate primarily involves understanding the cash position and the inflows and outflows of funds related to a property. Cash flow statements are essential financial tools that provide a clear picture of how cash is generated and utilized over a specific period. They typically outline the operating cash flow, which includes rental income and other operating revenues, as well as the cash outflows, such as expenses for maintenance, taxes, and management. By analyzing cash flow statements, investors and analysts can determine whether a property can generate enough cash to meet its short-term obligations and overall liquidity needs.

In comparison, while lease agreements and rent rolls provide valuable information about current income and tenant commitments, they do not directly reveal the comprehensive cash situation necessary for liquidity assessment. Historical sales data offers insights into property value trends and market performance but is not focused on cash flow nor does it assess a property's ability to meet immediate financial obligations. Therefore, cash flow statements are the most relevant and effective tool for evaluating liquidity in real estate.