Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
64 Cards in this Set
- Front
- Back
|
The principle of __________ is the basis of the income capitalization approach
|
Anticipation
|
|
|
Value can be estimated in the income capitalization approach by...
|
Dividing the net operating income by the overall capitalization rate
|
|
|
Suppose a lease contract called for a rent of $10 per square foot. However, similar space in the market rented for $15 per square foot. The amount specified in the lease is known as the _________ rent.
|
Contract
|
|
|
In a gross lease, who pays the utility costs?
|
The landlord
|
|
|
Market rent is...
|
The amount of rental income a property would command in the open market
|
|
|
A property has a net income of $36000 per year. The operating expense ratio is 36%. The vacancy and collection loss is estimated to be 4%. What is the effective gross income?
|
$56,250
|
|
|
A local investor recently purchased a small strip center for $1235000. She obtained a 75% mortgage at 7% with a 25 year amortization. The payments are $6546.54 per month. The buyer expected the first year's net operating income to be $96000. What is the equity dividend rate?
|
0.0565
|
|
|
A tenant has a lease that states the base rent is $5000 per month plus 3% of the sales above $50000 in gross sales per month. The tenant's sales last year were $850000. How much rent was paid last year?
|
$67500
|
|
|
In a soft market, a landlord accepted a new tenant with a 60–month lease at $5000 per month but gave the new tenant six months of free rent. Using the average rent method, what is the effective monthly rent?
|
$4545
|
|
|
A multi tenant building has four tenants described as follows:Suite 1 has 5000 square feet and is under lease for five more hers at $12 per square foot per year.Suite 2 has 5000 square feet and is vacant. The market for this space is $15 per square foot per year.Suite 3 has 5000 square feet and is under lease for two more years at $13 per square foot per year.Suite 4 has 5000 square feet and is on a month–to–month tenancy at $15 per square foot per year.
Expenses for this building are $5 per square foot per year. Vacancy and collection loss is estimated at 5% of PGI. All the leased spaces are the same.What is the net operating income (rounded to 10000) |
$160000
|
|
|
The subject property has an annual net income expectancy of $75000, and recent comparable sales have the following characteristics:
Sale 1 sold for $1000000 and has an annual net income expectancy of $98000. Sale 2 sold for $750000 and has an annual net income of $75000. Sale 3 sold for $650000 and has an annual net income expectancy of $62500 Sale 4 sold for $500000 and has an annual net income expectancy of $49500 What is the market value of the subject property (rounded to the nearest $50000)? |
$750000
|
|
|
What is the expected annual income of a property that recently sold for $100000 and for which the buyers indicated that they used an overall capitalization rate of 9.25%?
|
$9250 per year
|
|
|
The subject property has a potential gross income (PGI) of $100000, a vacancy and collection loss of 7%, fixed expenses of $35000, variable expenses of $25000 and reserves for replacement of $7000. Recent sales of very similar properties in this market suggest that a capitalization rate of 12% is appropriate. The capitalization rates were extracted from sales in which the price was divided into the estimate of net operating income from the broker without reserves. What is the market value of the subject property?
|
$275000
|
|
|
What is the value of a property with an effective gross income (EGI) of $423000 an operating expense ratio of 32%, and an overall capitalization rate of 0.11?
|
$2500000
|
|
|
The subject property has a level income of $30000. In the mortgage market for this type of property, the best rate available is 9% per year with monthly payments, a 25–year amortization and a maximum 75% loan–to–value. The equity capitalization rate is 15%. What is the market value?
|
$265000
|
|
|
What is the market value of a property with a net operating income of $75000, an annual debt service of $60k, a loan–to–value ratio of 75%, and a mortgage constant of 0.1281?
|
$600000
|
|
|
What is the indicated equity capitalization rate of a property with a sale price of $400000, a net operating income of $35000, mortgage terms of 9.75% for 25 years, fully amortized with monthly payments, and a loan–to–value ratio of 65%?
|
0.0514
|
|
|
What is the indicated property value of a property that has a net operating income of $150000 per year? The value of the land is $550000. The land capitalization rate is 9.75% and the building capitalization rate is 12.25%. What is the property value?
|
$1300000
|
|
|
An investment has a net operating income of $140000. Market rate mortgage financing is available at 75% of value at 9.5% per year with monthly payments, amortization over 25 years, and an equity dividend rate of 5.5%. What is the market value?
|
$1500000
|
|
|
An apartment complex has a net operating income of $100000. Both income and value or expected to increase gradually over the next 10 years at a compound rate of 2% per year. What is the market value if the yield rate necessary to attract investors to 10%? |
$1250000 |
|
|
What resale price is necessary to achieve a yield rate of 11% on the investment, given the following information:
Sale price = $150000 Net Operating Income (level) = $7000 Projection period = 5 years |
$210000 |
|
|
The subject property has the following cash flows:
$5000 per year for the first 3 years $6000 per year for the next 5 years $9000 per year for the next 5 years $1.2 million reversion at the end of the lease What is the market value of a leased fee interest in the subject if it is valued at 9% yield as an ordinary annuity with annual accounting? |
$440000 |
|
|
The subject property has the following cash flows: $5000 per year for the first 3 years $6000 per year for the next 5 years $9000 per year for the next 5 years $1.2 million reversion at the end of the lease What is the market value if the cash flows are paid in advance? |
$445000 |
|
|
The subject property has a projected level income of $300000 for the next 5 years. The property value is expiated to increase by 10% over the projection period of five years. The yield rate is 8%. What is the market value of the property? |
$500000 |
|
|
A property was just sold for 25% more than its purchase price nine years ago. If the seller originally paid $750000 and there was a level net operating income of $59000 over this period, what yield did the seller realize?
|
10% |
|
|
A property was purchased for $1250000. The net operating income is $100000. Both net operating income and value are expected to increase at a compound rate of 1% per year. What yield will be achieved if the property is held for 10 years?
|
9% |
|
|
What is the yield on the purchase of a leasehold position paying $25000 per year for the next 25 years with payments at the end of the period if the purchase price is $175300?
|
14% |
|
|
A coal mine produces about $100000 a year in net income. The consulting geologist indicated that the mine will produce that amount of money each year for 11 more years. At the end of the mining operation, the land will have no value except as a landfill. The value for that use should be about $100000. Investors in this type of property require a yield of 9% on the investment. What is the value of the coal mine?
|
$700000 |
|
|
What are primary uses of discounted cash flow analysis? |
To calculate the present value and rate of return |
|
|
A property recently sold for $587000, and the buyer indicated that he anticipated a 10-year holding period and used a 7% discount rate and a level net income of $64000. What should have been the expected reversion at the time of resale?
|
$270465 |
|
|
A property earning $10000 per year was purchased for $150000 seven years ago. In this market, investors require a 7% annual yield rate. What will the property have to resell for in order to achieve this rate of return?
|
$154327 |
|
|
What is the internal rate of return on a real estate investment paying $10000 per year for the next 20 years with payments at the end of the period if the purchase price is $71306? There is no reversion on this investment
|
12.75% |
|
|
What is the value of an investment that generates no periodic income but has a reversion of $456000 in 12 years at a discount rate of 6%? Use end-of-year, annual calculations.
|
$226618 |
|
|
The subject property is a four-acre site that was leased 22 years ago for $1000 per month, absolute net for 99 years. There were no improvements at that time, but there is a 35000 sq-ft office building on it now that was built by the tenant. This area is quite popular now and probably will be in the future. The typical holding period for a leased property like this is 20 years. The value of the property would be based on a terminal capitalization rate of 8%. What is the value of the leased fee using a 6% discount rate? Assume there are no sales costs on the reversion.
|
$184000 |
|
|
What is the internal rate of return for a property that was purchased for $450000; had net operating incomes of $45000, $52000, $56000, $56000, and $60000 per year; and was sold for $407000 at the end of the sixth year? The periodic cash flows are payable in arrears. Round your answer to the nearest percent.
|
11% |
|
|
Calculate the value of a property with the following cash flows and reversion:
5000 per year for the first three years 6000 per year for the next 5 years 9000 per year for the next 5 years 1.2 million reversion at the end of the lease The required yield rate is 11% |
$351884 |
|
|
Calculate the value of the subject property based on the following cash flows: The cash flows start at 34k per year for two years but then increase by 5k for five years, and again by 5k for five years. There is an option to purchase at the end of the lease for 500k, which is expected to be exercised because the tenant has invested $500000 in tenant improvements. This is a low-risk investment because of the lease and almost guaranteed reversion, so the discount rate is 7%.
|
$535500 |
|
|
The final value opinion should... |
Be rounded to show that the number is an opinion, not a precise calculation |
|
|
The process by which the appraiser evaluates, chooses, and selects a final value opinion is known as...
|
Reconciliation |
|
|
Giving a client a range of values rather than a single value opinion...
|
Allows for a greater probability of correctness |
|
|
In an appraisal of property using the three approaches to value, each approach resulted in a different value indication. The indicated value by the cost approach was $100000, the indicated value by the sales comparison approach was $93500, and the indicated value by the income capitalization approach was $95000. Are you forced to choose one of these value indicators?
|
No you can choose any one of the number or any number between and, in come cases, slightly above or below the range |
|
|
If the three approaches to value provide three different value indications, the appraiser should...
|
Choose a value opinion that best represents the market for the subject based on all data available as of the date of the appraisal. |
|
|
How significant is the reported open market sale price of the subject property if the sale has not closed yet?
|
Significant because the buyers have made a statement with their checkbook |
|
|
A residence has been listed for sale in the MLS for the last six months at a price of $124900, and it has not sold. In this market, the average marketing period is 45 days for this type of property.
|
The subject property's market value is less than the list price |
|
|
If the subject is a special purpose property and the value indication by the cost approach is much higher than the value indication by the sales comparison approach, what is the typical problem?
|
The cost approach needs to be adjusted (or adjusted more) for the loss in value due to functional obsolescence. |
|
|
The type of appraisal report... |
Has no influence on the appraisal process |
|
|
A narrative appraiser report...
|
Gives the appraiser the freedom to design the report in the manner that is most efficient |
|
|
Residential appraisal reports always involve...
|
Various forms and report types, depending on the assignment |
|
|
In an appraisal report, the appraiser must include...
|
The effective date of the appraisal and the fate of the report |
|
|
A client ordered an appraisal of his property at 2134 Roberts Road in Smallburg. The local appraiser developed an opinion of value. Before she could get finish the job, the client cancelled the order. The appraiser never provided to her any of her findings to the client orally or in writing. This appraiser completed an...
|
Appraisal only |
|
|
An attorney is reading a document prepared by an appraiser on a vacant lot. The document states and supports a value of $1000000 on the property. This document is called a(n)...
|
Appraisal report |
|
|
An appraisal review assignment... |
Can include the reviewer's opinion of the value of the subject property of the report under review, as of the date of the first appraisal. |
|
|
An appraiser who specializes in review appraisal work...
|
Must be competent to do the review or follow the required steps to become competent |
|
|
An appraiser was asked to look at an appraisal report of the subject property prepared by another appraiser. The client wanted a report that included the appraiser's opinion of the first report and also an independent opinion of value (if different from the first report). This client is asking for a(n)...
|
Appraisal review and an appraisal by the reviewer |
|
|
An appraiser prepared an appraisal report on a small commercial property. A reviewer found that there were many small errors in the report. Which of the following statements is correct?
|
This may be a problem if all the errors are pointing in the same direction |
|
|
In an appraisal review assignment, the subject...
|
May be all or part of a report, a work file, or a combination of these and may be related to appraisal, appraisal review, or consulting. |
|
|
If a reviewer does a poor job of reviewing an appraisal assignment and report..
|
This may be revealed by a review of the review |
|
|
In a review assignment, the scope of work...
|
Can be different than the appraisal work under review |
|
|
In an appraiser review assignment, the reviewer...
|
May offer an opinion of value for the real property shown as the subject in the appraisal report under review if the scope of work includes this |
|
|
Professional standards apply... |
to any service in which the individual is "acting as an appraiser" |
|
|
Assignments that fall under the category of consulting services include(3) |
Land use studies, risk analysis, and portfolio analysis Risk analysis, portfolio analysis, and discounted cash flow analysis Highest and best use analysis, land use studies, and risk analysis |
|
|
The three general classes of property are... |
Real property, intangible property, and personal property |
|
|
Which of the following is not a specialized technique for valuing non-realty interests? |
The subdivision development method
|
|
|
Which of the following property types is the most likely to involve consideration of non-realty assets? |
National chain hotel properties |
