Appraisal-Income Approach

Question 1

Discounting

Answer 1

Converting rents and other future benefits at a specified yield rate

Question 2

Value

Answer 2

NOI/Rate V=I/R

Question 3

Apartment

Answer 3

Emphasis on income approach

Question 4

Operating Expenses

Answer 4

variable and fixed

Question 5

Reserve allowance

Answer 5

short-lived items only: roofs, HVAC, water heaters, parking lots

Question 6

OER

Answer 6

cash flow analysis

Operating Expenses/EGI

Question 7

Long Live Items

Answer 7

Kitchen Cabinet

Question 8

Overage Rent

Answer 8

When a tenant pays a base rent plus percentage of sale, the additional amount is known as overage rent

Question 9

Not true ABOUT Cap Rate

Answer 9

is utilized to estimate the value of an unstable income stream

it Must be STABILIZED

Question 10

Disadvantage of GRM

Answer 10

data is not available

Question 11

Rate

Answer 11

Ratio of NOI to value

Question 12

Mineral rights

Answer 12

partial interest

Question 13

Expenses

Answer 13

Fixed Expenses +
Variable Expenses +
Replacement Reserve

Question 14

Direct Capitalization

Answer 14

Annual Income - Annual Expenses/ Cap Rate

Question 15

NIR

Answer 15

NOI/EGI

Question 16

Direct Capitalization (market value)

Answer 16

1. abnormally high vacancy & collection losses
2. 100% occupancy
3. debt service and depreciation
   CANNOT used an INVESTOR-CHOSEN cap rate (investment value)

Question 17

Net rest loss

due to incurable functional obsolescence

Answer 17

Net Rent Loss/Building Cap Rate (Functional obsolescence is for the whole building)

Question 18

Rate to Mortgage

Answer 18

Debt Portion (0.75%) x Mortgage constant (0.1127)