REE Chapter 8

Which of the following are used in the direct capitalization approach to estimating a property's market value? Multiple select question. Estimated accrued depreciation Expected sale price at the end of the expected holding period Capitalization rate Projected net operating income

Capitalization rate Projected net operating income

The income approach to valuation Multiple choice question. cannot be used for personal residences is based on the concept of present value depends on an accurate estimate of economic depreciation

Correct Answer is based on the concept of present value

Which of the following is the most true? Multiple choice question. Cap rates and expected growth rates drive discount rates Cap rates determine value Discount and expected growth rates rates drive cap rates

Discount and expected growth rates rates drive cap rates

When analyzing the operating expenses of a small office building, which of the following is a relatively fixed operating expense? Multiple choice question. Management expense Heating and air conditioning expenses Hazard and fire insurance premium Monthly mortgage payment

Hazard and fire insurance premium

Which of the following expenditures does not affect the calculation of net operating income? Multiple choice question. lawn maintenance utility expenses monthly mortgage payments minor property repairs

Monthly mortgage payments

Which of the following items is considered the fundamental determinant of market value? Multiple choice question. Effective gross income Net operating income Potential gross income

Net operating income

When estimating the net operating income of a property, which of the following expenditures would be included? Multiple select question. Property taxes mortgage payments Hazard and fire insurance premiums federal income tax payments

Property taxes Hazard and fire insurance premiums

Which of the following statements best describes a "step-up" lease? Multiple choice question. Rental rates increase at predetermined rates at predetermined times Rental rates increase based on the rate of general inflation in the economy Tenants pay an increasing share of building-level operating expenses over time

Rental rates increase at predetermined rates at predetermined times

Appraiser are more likely to estimate actual capital expenditures in the period (year) they are expected to be incurred if the appraiser is using ____________ to estimate value. Multiple choice question. a direct capitalization model a discounted cash flow model a deferred maintenance model a residual valuation model

a discounted cash flow model

Two apartment markets are considered to be equally risky. If market participants expect more price appreciation in market A than in market B, Multiple choice question. required returns will be lower in market A cap rates will be the same in both markets cap rates will be higher in market A cap rates will be lower in market A

cap rates will be lower in market A

The main models or approaches to valuing real estate using income capitalization include Multiple select question. rate of return analysis holding period analysis direct capitalization discounted cash flow

direct capitalization discounted cash flow

The rental income an existing, stabilized property is expected to generate, after allowances for vacancies and collection losses, is called Multiple choice question. effective gross income gross potential income net operating income gross operating income

effective gross income

The projected amount of income that is "loss to lease" in a given year Multiple choice question. is equal to the amount of rent that could be collected on vacant space if it were rented at market rental rates equals what rental income would be if the property were fully leased at market rental rates, minus actual rental income would be lower for properties that have a large number of below market leases

equals what rental income would be if the property were fully leased at market rental rates, minus actual rental income

The appraiser would only forecast renal income that is "loss to lease" Multiple choice question. if market rental rates for some of the space in the property are below the contract rental rates being paid by tenants if market rental rates for some of the space in the property are above the contract rental rates being paid by tenants if some of the space in the property is excepted to be vacant

if market rental rates for some of the space in the property are above the contract rental rates being paid by tenants

As the cap rate increases, the price (value) to NOI ratio Multiple choice question. decreases is unaffected increases

increases

Other names for the cap rate used in direct capitalization include Multiple select question. discount rate valuation rate overall capitalization rate going-in cap rate

overall capitalization rate going-in cap rate

Market rent can be defined as the property's Multiple choice question. net rent after expenses contract rent average rent potential gross rent

potential gross rent

Typically, higher expected growth rates in rental income Multiple choice question. produce higher effective gross income multipliers do not directly affect effective gross income multipliers produce lower effective gross income multipliers

produce higher effective gross income multipliers

Capital expenditures generally Multiple choice question. occur at regular intervals have no impact on the value of the property prolong the economic life of the structure

prolong the economic life of the structure

The average price-earnings multiples or ratios used to value the subject property come from Multiple choice question. the sales of publicly-traded stocks the sale prices of comparable properties the average multiple of the subject property in the last year

the sale prices of comparable properties

When forecasting the income the subject property is expected to produce in the future, the appraiser's job is to estimate the income that Multiple choice question. the mortgage lender would forecast the typical investor would forecast the current owner would forecast the property manager would forecast

the typical investor would forecast