Formulas appraisal and value

Question 1

Adjusting Comparables

Answer 1

1) Never subtract the subject! 2) If the comparable is superior to the subject, subtract value from the comparable. 3) If the comparable is inferior to the subject, add value to the comparable.

Question 2

Gross Rent Multiplier - sales price

Answer 2

Sales Price = Monthly rental income x Gross Rent Multiplier

Question 3

Gross Rent Multiplier - monthly rental income

Answer 3

Monthly Rental Income = Sales Price / Gross Rent Multiplier

Question 4

Gross Income Multiplier

Answer 4

Gross Income Multiplier = Sales Price / Annual Income

Question 5

Gross Income Multiplier - sales price

Answer 5

Sales Price = Annual Income x Gross Income Multiplier

Question 6

Gross Income Multiplier - annual income

Answer 6

Annual Income = Sales Price / Gross Income Multiplier

Question 7

Cost Approach Formula

Answer 7

Value = Land Value + (Improvements + Capital Additions - Depreciation)

Question 8

Depreciation

Answer 8

Annual Depreciation = Beginning Depreciable Basis / Depreciation Term (Number of Years)

Question 9

Depreciation Basis

Answer 9

(Initial Property Value + Any Capital Improvements - Land Value)

Question 10

Income Capitalization Formula - value

Answer 10

Value = Annual Net Operating Income / Capitalization Rate

Question 11

Income Capitalization Formula - annual net operating income

Answer 11

Annual Net Operating Income = Value x Capitalization Rate

Question 12

Income Capitalization Formula - cap rate

Answer 12

Capitalization Rate = Annual Net Operating Income / Value

Question 13

Net Operating Income

Answer 13

NOI = Potential Rent - Vacancy Loss + Other Income - Operating Expenses NOI does not include debt Payments!