Quiz Income Approach Ch 15-16 Flashcards
“A measure of central tendency identified as the middle value in an ordered array of numerical values” is the definition of
Median
“A measure of central tendency; the value of the middle item in an uneven number of items arranged or arrayed according to size or the arithmetic average of the two central items in an even number of items similarly arranged” is the definition of
Median
“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 “ is the definition of
Net operating income
“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” is the definition of
Effective gross income
“The region or area over which something is found, is distributed, or occurs” is the definition of
Range
“The sum of a series of values divided by the number of values in the group” is the definition of
Mean
“The total income attributable to real property at full occupancy before vacancy and operating expenses are deducted” is the definition of
Potential gross income
“Total income from a property before deducting any expenses, customarily stated on an annual basis” is the definition of
Gross income
A 4-unit property has two units rented at $900 per month, and two units rented at $1,200 per month. The vacancy and collection loss rate is 6%. Total operating expenses are $21,525. What is the EGI?
- 2 X $900 = $1,800. 2 X $1,200 = $2,400. $1,800 + $2,400 = $4,200. $4,200 X 12 = $50,400. $50,400 X .06 = $3,024. $50,400 - $3,024 = $47,376.
A 4-unit property has two units rented at $900 per month, and two units rented at $1,200 per month. The vacancy and collection loss rate is 6%. Total operating expenses are $21,525. What is the NOI?
- 2 X $900 = $1,800. 2 X $1,200 = $2,400. $1,800 + $2,400 = $4,200. $4,200 X 12 = $50,400. $50,400 X .06 = $3,024. $50,400 - $3,024 = $47,376. $47,376 - $21,525 = $25,851.
A motel has a gross annual income of $246,000 and its total operating expenses are $103,300. What is its expense ratio?
42%. $103,300 ÷ $246,000 = .42
A motel has a gross annual income of $458,000 and its total operating expenses are $201,500. What is its expense ratio?
0.44
An apartment complex has a gross annual income of $418,000 and the expense ratio is 38%. How much are the total operating expenses?
158840
Effective Gross Income - __________________ = Net Operating Income.
Operating expenses. You subtract operating expenses from EGI to arrive at NOI.
Fannie Mae form 1007 is titled
Single Family Comparable Rent Schedule
Fannie Mae Form 216 should be used when appraising
2-4 unit residential properties plus one-unit investment properties
How many comparable sales are needed to derive a reliable GRM?
At least five or six
If you are in a market area in which there are rent controls:
Don’t use the GRM approach
In actual appraisal practice, Form 216 is most commonly prepared by the:
Appraiser
In actual practice, the Operating Income Statement (Form 216) is typically prepared by:
The appraiser
In every statistical distribution there is always a _________ but there may not be a ____________.
Median, mode
In Form 216, the income and expenses have to be projected for the next ____ months.
12
In order to entice a prospective tenant to sign a lease, an apartment building owner offers one month of free rent. This would be considered
a rent concession
Lenders use _____________ income when underwriting loans for 2 to 4 unit residential properties.
Operating
Potential Gross Income - _________________ = Effective Gross Income.
Vacancy and credit loss
Potential Gross Income – Vacancies and Credit Loss = ____________________.
Effective gross income
Potential gross income plus other income minus ___________ equals ______________.
allowance for vacancies, effective gross income
Replacement reserves might be established for all of the following items
Water heaters, Boilers, Roof covering
Sale prices and rent at time of sale: $125,000 - $950; $120,000 - $900; $134,500 - $1000; $145,000 - $1100; $128,000 - $950; $116,000 - $900. What is the median rent?
- To find the median, first array the rents in order: 900, 900, 950, 950, 1,000, and 1,100. There are 6 rents; the median lies midway between the third and fourth from either end. The third and 4th GRMs are 950 and 950. The number that is midway between them is 950.
Sale prices and rent at time of sale: $125,000 - $950; $120,000 - $900; $134,500 - $1000; $145,000 - $1100; $128,000 - $950; $116,000 - $900. What is the GRM median?
132.6. If you divide each sale by each rent at the time of sale, the GRMs are 131.6, 133.3, 134.5, 131.8, 134.7, and 128.9. To find the median, first array the GRMs in order: 128.9, 131.6, 131.8, 133.3, 134.5, and 134.7. There are 6 GRMs; the median lies midway between the third and fourth from either end. The third and 4th GRMs are 131.8 and 133.3. The number that is midway between them is 132.6.
Sale prices and rent at time of sale: $125,000 - $950; $120,000 - $900; $134,500 - $1000; $145,000 - $1100; $128,000 - $950; $116,000 - $900. What is the mode of the rents?
$900 and $950
Sale prices and rents at time of sale: $125,000 - $950; $120,000 - $900; $134,500 - $1000; $145,000 - $1100; $128,000 - $950; $116,000 - $900. What is the mean of the GRMs?
132.5
The comparable sales utilized in a GRM approach should be ____________, in all aspects, as the comparable sales utilized in the sales comparison approach.
At least as good
The Fannie Mae 1007 form is used to
estimate the market rent of the subject property
The GRM approach is most appropriate when appraising ______________ residential properties.
One to four units
The main difference between gross and net income is
Operating expenses
What is the range of following GRMs? 105.0, 104.0, 103.2, 106.0, 110.4, 107.2, 104.0, 106.0, 105.5, 102.0
8.4. The high is 110.4 and the low is 102.0. The range is the difference between the two numbers, or 8.4.
When using Form 216 where at least one of the units is owner occupied
Do not use any rent for the owner-occupied space
When using the Fannie Mae 1007 form, an appraiser is expected to ________ any utilities that may be included in the comparable property rental amounts.
subtract
Which measure of central tendency is least affected by extreme values?
Median
Which of the following would be a typical lease terms?
Apportionment of expenses, Ability to sub-let, Penalties for late payments
Which type of income considers vacancies?
Effective gross income
Which would be classified as “other income”?
Parking space rental, Vending machine income, Coin-operated washers and dryers
Which would be considered a management expense?
Collecting rent, Advertising, Preparing leases
With regard to the income approach, the major difference between the old 1993 URAR form and the current 2005 URAR form is that
The current form provides more space for the appraiser to support the Market Rent and GRM figures
