RES Flashcards
CAPITALIZATION IS THE PROCESS USED TO: ESTABLISH REPRODUCTION COST ESTABLISH MORTGAGE PAYMENTS ESTABLISH A DEPRECIATION SCHEDULE CONVERT INCOME INTO AN ESTIMATE OF VALUE
CONVERT INCOME INTO AN ESTIMATE OF VALUE
THE UNDERLYING PRINCIPLE PROVIDING THE BASIS OF THE INCOME CAPITALIZATION APPROACH IS: CHANGE BALANCE CONFORMITY ANTICIPATION
ANTICIPATION
A PROPERTY HAS A NET OPERATING INCOME OF 10,000, INTEREST PAYMENTS OF 8000 AND PRINCIPAL PAYMENTS OF 1000. WHAT IS THE DEBT COVERAGE RATIO? .09 .1 1.11 .08
1.11
A GIM IS OBTAINED BY DIVIDING THE: SALE PRICE BY ANNUAL INCOME SALE PRICE BY MONTHLY INCOME OVERALL CAP RATE BY SALE PRICE ANNUAL INCOME BY SALE PRICE
SALE PRICE BY ANNUAL INCOME
If the land to building ratio had been used to establish land value, what valuation method would this have been? abstraction allocation comparable sales comparative unit
allocation
What type of cost is typically preferred by appraisers? reproduction cost replacement cost historical cost trended original cost
replacement cost
What is the formula for using the age-life method to calculate the economic life of a property? remaining econ life - eff age remaining econ life - actual age remaining econ life + eff age remaining econ life + actualage
economic life=remaining economic life+EFF age
All three approaches to value are based upon what economic principle? change conformity anticipation substitution
substitution
An interior inspection of a property shows it is suffering from extreme deferred maintenance. What would be the best way to measure this depreciation?
deferred maintenance should not be considered
determine the cost to cure
already recognized by the economic obsolescence
none of the above
determine the cost to cure
What economic principle states that land and improvements must be valued on the same use? consistent use competitive use demand conformity
consistent use
The basic equation used in the income approach is
income divided by rate equals value
From tenants standpoint, when economic rent exceeds contract rent the difference is known as
leasehold income
Anticipated income from all operations of the property adjusted for vacancy and collection losses, and misc income is called
effective gross income
If an income property has an annual effective gross income of 64000 with total expenses of 30000 and variable expenses of 17000, what is the operating expense ratio?
.47 (total is 30, dont add 17) EGI/TOTAL
apartment complex, PGI is 500000, vacancy 6%, operating expenses 205000, what is operating expense ratio
44% (205/500*.94)
Office building has 30000 sq ft gross building area, 24000 sq ft rentable area. market rent 15/sq ft of net rentable area, vacancy and collection is 3% of gross potential income. Operating expenses are 32% of EGI, and the sales price was 2793600.
What is PGI, EGI, NOI, Ro
PGI-360000
EGI-349200
NOI-237456
Ro-.085
A property has a NOI of 10000, interest payments of 8000 and principal payments of 1000. What is the debt coverage ratio?
1.11
Building cap rate- .11, land cap rate- .09, land value as percent of total 35%
What is overall cap rate by using the band of investment method?
.103
An apartment house is valued at 420000 and has a net income of 2800 per month. Calc overall cap rate for the investment
8%
Which of the following is not neeed for band of investment method? reversion loan to value ratio rate for equity rate for debt
reversion
The rate that is the percentage that annual real estate taxes are in relation to the propertys total value is
effective tax rate
The ratio of net operating income to effective gross income is called
net income ratio
mortgage cap rate Rm is the percentage of the original loan that is required to be paid monthly annually quarterly by the lender
annually
PGI 1545000, vacancy 5%, operating expenses 543068, EGI multiplier 7. What is overall cap rate Ro?
.09 (NOI/EGI, EGI=1467750, NOI=924682) NIR/EGIM
Typical properties are financed with 60% debt and 40% equity. Require 8% of amount borrowed to be paid annually to amortize the loan, typical equity dividend rate Re would be .11 for equity investor. What is overall cap rate Ro?
.092
Debt .6 .8 .048
equi .4 .11 .044
commercial property recently sold for 7000000, is expected to produce a NOI of 630000 during first year. Expected to increase in income and value 4% per year over next 5 years, what is overall yield rate Yo
Ro+CR=Yo .13
Debt coverage ratio requirement from lenders is 1.5. Lenders will finance 80% of the investment and require a mortgage annual constant of 11.5%. What would be the indicated overall cap rate RO indicated for the subject
Ro=DCRxRmxM
13.8
GIM is what divided by what
sale price divided by annual income
apartment house is valued at 420000 and has net income of 2800 per month. calc overall rate for invesement
8%
The method of converting future net benefits into present value where each future net benefit is discounted at a proper yield rate (discount rate) is
yield capitalizatiion
A property has a land value of 1000000, a net operating income of 350000, a land cap rate of 10%, and a bldg cap rate of 12.5%. What is the value of the subject?
I R V
B-250k .125 2000000
L-100k .10 1000000
T- 350k
3000000
in straight line capitalization ____ is received in equal amounts during the economic life of the imrovement
recapture
