California Real Estate Appraisal - Principles & Procedures Chapter 10: Income Approach to Value

"Recapture" is the return:

"of" the investment. page 316

In discounting, the term for a series of regular payments made under the terms of a lease is:

Annuities See page 336

The percentage rate used to convert the income into value is called the:

CAP rate. rate. capitalization rate. (wrong) all of the above.

The percentage rate used to convert the income into value is called the:

CAP rate. rate. capitalization rate. wrong answer all of the above. See page 318

What approach does an appraiser use when estimating a property's value by analyzing the amount of income produced by the property?

The income approach See page 315

A formula for direct capitalization is:

Value = Income divided by Rate (Cap). See page 318

The term "residual" refers to something that is:

left over.

The reciprocal of the capitalization rate is known as:

the factor or multiplier. See page 319

The ratio between the amount of income and the amount of the investment is known as:

the rate of return. See page 315

Reserves for replacement are funds set aside:

to replace short-lived components. See page 322

On which of the following can an appraiser estimate value?

Pre-tax cash flow Potential gross income Effective gross income All of the above correct answer page 320

Which of the following statements is FALSE?

Recapture is the return "of" the investment. Recapture is the return "on" the investment. correct Interest or yield is a profit return "on" the investment. None of the above. The repayment of capital return "of" the investment is called RECAPTURE, while the profit return "on" the investment is referred to as INTEREST or YIELD. See page 316

A reconstructed operating statement is:

a statement of income and expenses used for income capitalization. See page 323

The reciprocal of the capitalization rate is called a:

both a factor and a multiplier. See page 319

The greater the risk a future investment will not be realized, the:

both higher the return an investor will require and the lower the value of the investment. See page 317

When the income from a single period (usually a year or month) is converted directly to value, it is called:

direct capitalization. See page 318

The formula for operating expense ratio is: OER = operating expenses divided by:

effective gross income. page 328

The term "yield" is used to refer to the income earned by a(n):

equity investment. See page 316

7. The total amount of revenue a property is capable of producing at full occupancy, without any deduction for expenses, is called:

net operating income (NOI). effective gross income (EGI). effective net income (ENI). none of the above. correct answer See page 321

The financial report that lists income and expenses for a property is called a(n):

operating statement.

The percentage rate used to convert income into value is known as:

the capitalization rate. See page 319