Appraisal Exam 2

Question 1

Band of Investments (Cap Rate)

Answer 1

(Mortgage % * Mortgage Constant) + (Equity % * ((NOI - Mortgage Constant) / Down-payment))
Then Market Value

Question 2

Market Value

Answer 2

NOI / Band of Investments (Cap Rate)

Question 3

Direct Capitalization

Answer 3

PGI - Vacancy = EGI - Toes (Op Ex) = NOI
then NOI/Cap Rate

Question 4

How to get the cap rate for direct capitalization second equation

Answer 4

(Comp 1 Cap Rate + Comp 2 Cap Rate) / 2 = Cap rate to use

Question 5

How to get the cap rates from comps 1 and 2

Answer 5

NOI/Sales Price

Question 6

The three steps in a yield capitalization equation

Answer 6

Yield cap (years 1 through the holding period plus a year), then Resale year (NOI of the last year), then finally discounting (years of the holding period), add up all values at the end for final value

Question 7

Yield Cap Rate

Answer 7

PGI - Vacancy = EGI - TOES (Op Ex = NOI, for years 1 through 4, multiply each years NOI by 1+ the income increases %, vacancy for each year by the vacancy percent, and TOES (op ex) by 1 + the expenses increase

Question 8

Resale Year

Answer 8

NOI Year 4 / TCR (Terminal Cap Rate) = Sales Price - Commission (sales price * sales commission on resale %) = reversion

Question 9

Discounting

Answer 9

NOI + Reversion = TCF * Discount = DCF, then do that for the rest of the holding period and add all the final values up