Chapter Two

Question 1

GAAP versus IFRS

Answer 1

the key change for real estate is reporting asset value on the balance sheet at fair market value rather than depreciated cost.

Question 2

Gross Potential Income (GPI)

Answer 2

Total income attributable to real property at full occupancy (includes rental income and other income), before vacancy and operating expenses are deducted

Question 3

Effective Gross Income (EGI)

Answer 3

The anticipated income from all operations of the real property (rental and other) after an allowance is made for vacancy and collection losses.

Question 4

Gross income multiplier (GIM) or Overall Cap Rate (OCR)

Answer 4

Common ratios (or multiplier) used in real estate analysis to compare performance and estimates

Question 5

The most commonly used measure of analysis in appraisal is:

Answer 5

OCR the overall cap rate

Question 6

Break Even Analysis

Answer 6

The break-even point (where NOI = 0) is 14 suites: below this point of occupation the NOI income will be negative and above this point it will be positive.

Question 7

Break Even Point

Answer 7

Break-Even Point (n) = FE

erpu -vepu

Question 8

Income

and

Cash Flow

Answer 8

Gross Potential Rental Income

+ Other Income

Gross Potential Income

– Vacancy Allowance

– Collection Loss Allowance

Effective Gross Income

– Variable Expenses

– Fixed Expenses

Net Operating Income (Before Replacement Allowance)