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Residential Sales Comparison and Income Approaches > Chapter 14 Income Multipliers > Flashcards

Chapter 14 Income Multipliers Flashcards

1
Q

Specific appraisal techniques applied to develop a value indication for a property based on its earning capability and calculated by the capitalization of property income.

A

Income Capitalization approach

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2
Q

Total income from a property before deducting any expenses, customarily stated on an annual basis

A

gross income

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3
Q 
“Total income from a property before deducting any expenses, customarily stated on an annual basis” is the definition of
Cash Flow
Effective Gross Income
Net Operating Income
Gross income
A

gross income

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4
Q 
The reciprocal of 4 is
.25
.40
40
.44
A

.25

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5
Q

A value can be developed through the Income Capitalization Approach by either
Dividing an income by a factor or multiplying it by a rate
Dividing an income by a rate or dividing it by a multiplier
Dividing an income by a rate or multiplying it by a multiplier
Multiplying an income by a rate or subtracting a factor

A

Dividing an income by a rate or multiplying it by a multiplier

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6
Q

A ratio of one year’s Net Operating Income provided by an asset to the value of the asset; used to convert income into value in the application of the Income Capitalization Approach.

A

capitalization rate (R value in formula V= I/R)

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7
Q

The actual or anticipated net income that remains after all operating expenses are deducted from effective gross income but before mortgage debt service and book depreciation are deducted. Note: This definition mirrors the convention used in corporate finance and business valuation for EBITDA (earnings before interest, taxes, depreciation, and amortization).

A

Net operating income

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8
Q

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

A

Discounted Cash flow analysis

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9
Q

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

A

Gross rent multiplier (GRM)

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10
Q

The GRM approach is based on the assumption that there is a

A

direct relationship between rental income and value

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11
Q

A property sold for $132,000. Its Contract Rent was $775 and its Market Rent was $850. What was the GRM?

  1. 2
  2. 3
  3. 5
  4. 7
A

155.3

132,000 / 850

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12
Q 
"A ratio of one year’s Net Operating Income provided by an asset to the value of the asset; used to convert income into value in the application of the Income Capitalization Approach " is the definition of
Gross Income Multiplier
Capitalization rate
Effective Gross Income Multiplier
Recapture rate
A

capitalization rate

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13
Q 
When calculating a GRM, appraisers should use \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Rent.
Gross annual
Gross monthly unfurnished
Adjusted gross
Net monthly
A

gross monthly unfurnished

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14
Q

an amount paid for the use of land, improvements or a capital good

A

rent

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15
Q

he actual rental income specified in a lease

A

contract rent

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16
Q

the income due under existing leases.

A

scheduled rent

17
Q

The most probable rent that a property should bring in a competitive and open market reflecting the conditions and restrictions of a specified lease agreement, including the rental adjustment and revaluation, permitted uses, use restrictions, expense obligations, term, concessions, renewal and purchase options, and tenant improvements (TIs).

A

market rent

18
Q

Gross Income Multipliers are applied to

A

larger multi-unit residential properties and non-residential income-producing properties.

19
Q

Rent is strictly income from the use of land or improvements. Gross Income from a property may include rent plus other kinds of income:

A

from renting of garages, coin operated washers and dryers, etc. Rent is utilized on a monthly basis – whereas, income is stated on an annual basis.”

20
Q

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

A

potential gross income

21
Q

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.

A

Effective gross income

22
Q 
“The actual rental income specified in a lease” is the definition of \_\_\_\_\_\_\_\_\_ Rent.
Contract
Actual
Excess
Market
A

contract

23
Q 
“The most probable rent that a property should bring in a competitive and open market reflecting the conditions and restrictions of a specified lease agreement, including the rental adjustment and revaluation, permitted uses, use restrictions, expense obligations, term, concessions, renewal and purchase options, and tenant improvements (TIs)” is the definition of \_\_\_\_\_\_\_\_\_\_\_\_ Rent.
Contract
Actual
Scheduled
Market
A

market

24
Q

A 3-unit property sold for $155,000. Its Contract Rent for each unit was $950 per month and its Market Rent was $900 per month. What was the GRM?

  1. 3
  2. 4
  3. 8
  4. 2
A

57.4

900 x 3 (3 unit property) = 2700

155000/2700

25
Q

A 3-unit property sold for $155,000. Its Contract Rent for each unit was $950 per month and its Market Rent was $900 per month. What was the GRM?

  1. 3
  2. 4
  3. 8
  4. 2
A

57.4

900 x 3 (3 unit property) = 2700

155000/2700

26
Q 
"The total income attributable to real property at full occupancy before vacancy and operating expenses are deducted" is the definition of
Net Operating Income
Effective Gross Income
Potential Gross Income
Scheduled Gross Income
A

Potential Gross Income

27
Q 
The reciprocal of .20 is
2.5
5.0
5.5
20
A

5

28
Q 
Licensed Residential Appraisers are qualified to appraise non-complex 1-4 residential units with a transaction value of less than \_\_\_\_\_\_\_\_\_\_\_\_ and complex 1-4 unit residential units with a transaction value less than \_\_\_\_\_\_\_\_\_\_\_\_\_.
$500,000, $250,000
$1,000,000, $500,000
No Limits
$1,000,000, $250,000
A

$1,000,000, $250,000

29
Q 
Under state licensing statutes licensed or certified residential appraisers are allowed to appraise \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ residential units.
1 and 2
1 to 3
1 to 4
No set number
A

1 to 4

30
Q 
"The relationship or ratio between the sale price or value of a property and its periodic gross rental income" is the definition of
Discounted Cash Flow
Gross Rent Multiplier
Gross income ratio
Capitalization rate
A

gross rent multiplier

31
Q 
"A ratio of one year’s Net Operating Income provided by an asset to the value of the asset; used to convert income into value in the application of the Income Capitalization Approach “ is the definition of
Discount rate
Capitalization rate
Compounding
Multiplier
A

capitalization rate

32
Q

A property sold for $118,000. Its Contract Rent was $700 and its Market Rent was $800. What was the GRM?

  1. 6
  2. 9
  3. 3
  4. 5
A

147.5

Residential Sales Comparison and Income Approaches (19 decks)

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