Ch 10

Question 1

When someone purchases a one-unit home or 2-4 unit property purely for investment, these would be considered x properties, and properties with 5 or more living units are considered to be x properties.

Answer 1

residential
non-residential

Question 2

In what category falls a property with a store on the first floor with two apartments above?

Answer 2

Mixed use properties
and
considered to be non-residential properties.

Question 3

“The procedure in which a discount rate is applied to a set of projected income streams and a reversion. The analyst specifies the quantity, variability,timing, and duration of the income streams as well as the quantity and timing of the reversion and discounts each to its present value at a specified yield rate.” defines

Answer 3

Discounted cash flow analysis

Question 4

“The relationship or ratio between the sale price or value of a property and its periodic gross rental income.” defines

Answer 4

GRM
Gross Rent Multiplier

Question 5

Gross rent multiplier (GRM) analysis is based on the assumption that there is a direct relationship between xxx

Answer 5

rental income and value.

Question 6

A property is capable of generating $1,200 a month rent. The GRM is 90. The property’s indicated value would be

Answer 6

90 x $1,200 or $108,000.

Question 7

What are the limitations of using the GRM?

Answer 7

The technique can only be applied if there is a sufficient number of reliable sales and rental data.

Question 8

How many sales do we need when using the GRM?

Answer 8

We need six or eight, or more, to really provide a valid analysis.

Question 9

If you are in a market area in which there xxx, then GRM analysis should not be utilized.

Answer 9

are rent controls

Question 10

Sales for the Income Approach using GRM should be similar in what aspects?

Answer 10

physical characteristics
economic and
legal characteristics
Division of utility expenses between the landlord and tenant
Ratio of expenses to income
Lease terms

Question 11

The region or area over which something is found, is distributed, or occurs.” defines

Answer 11

Range

Question 12

“A measure of central tendency. The sum of values for a variable in a sample or population divided by the number of items in the sample or population. The arithmetic average.” defines

Answer 12

Mean

Question 13

“A measure of central tendency identified as the middle value in an ordered array of numerical values, e.g., 7 is the median of (1, 4, 6, 6, 7, 9, 11, 22, 41 ). If the ordered array contains an even number of values, then the median is the mean of the two values on either side of the middle.”

Answer 13

Median

Question 14

“A measure of central tendency consisting of the numerical value or categorical characteristic that occurs most frequently in a sample or population.” defines

Answer 14

Mode

Question 15

Which statistical indicator is usually most meaningful and why?

Answer 15

Median is not affected by extremes.

The mean is affected by extremes on either end.

The mode is only meaningful if there were 5 GRM at the exact same amount.

Question 16

What means adjusted Monthly Rent?

Answer 16

Rent
Minus amount for furnishings
Minus utilities
=Adjusted Monthly Rent

Question 17

What are rent concessions?

Answer 17

reduced rent
free rent for the first month or two
extra services
covering part of the utility cost

Question 18

If the subject of your assignment is a single-unit investment property, then Fannie
Mae x require the completion and attachment of the form 1007.

Answer 18

does

Question 19

The subject property is a four-unit building, consisting of two 2-bedroom units and two 1-bedroom units. Through research and analysis, you estimate the market rents for the 2- bedroom units at $1,500 per month, and the 1-bedroom units at $1,100 per month. The market extracted GRM is 95. What is the indicated value for the subject property?

Answer 19

2x$1,500
plus
2x$1,100
= Total gross monthly rent= $5,200
Multiplying the monthly rent of $5,200 x 95 GRM = $494,000 indicated value by the GRM
income approach.

Question 20

Difference between GRM and GIM?

Answer 20

GRM
- monthly rent
- smaller income properties
- includes rent only

GIM:
- annual income
- for larger multi-unit properties
- might include other income like from coin operated washers.

Question 21

“The relationship or ratio between the sale price or value of a property and its gross annual rental income.” defines

Answer 21

Gross Income Multiplier (GIM)

Question 22

“The total income attributable to real property at full occupancy before vacancy and
operating expenses are deducted. “ defines

Answer 22

Potential Gross Income (PGI)

Question 23

“The anticipated income from all operations of the real estate after an allowance is made for vacancy and collection losses and an addition is made for any other income. “ defines

Answer 23

Effective Gross Income (EGI)

Question 24

“A phase of a valuation assignment in which two or more value indications are processed into a value opinion, which may be a range of value, a single point estimate, or a reference to a benchmark value.” defines

Answer 24

Reconciliation

Question 25

The criteria that enable an appraiser to form a meaningful, defensible conclusion about the final value opinion. Value indications are tested for the appropriateness of the approaches and adjustments applied, the accuracy of the data, and the quantity of evidence analyzed. “ defines

Answer 25

Reconciliation Criteria

Question 26

The final reconciliation process consists of various items:

Answer 26

• Review
• Appropriateness
• Consistency
• Accuracy
• Relevance
• Quality of data
• Quantity of data