Ch. 9 Income Capitalization Approach

If we subtract vacancy and collection loss from potential gross income, we get A) effective gross income B) total operating expenses C) net operating income D) pre-tax cash flow

A) effective gross income

A property is currently rented for $1,200 per month, however market rent is only $1,000. The $200 difference between the contract rent and the market rent is A) excess rent B) deficit rent C) percentage D) an operating expense

A) excess

The formula for applying the income capitalization approach is value = rate / income B) value = income / rate value = income + rate value = rate - income + expenses

B) value = income / rate

True or False? If a property is rented, its market rent is always the same as its contract rent.

False

Which type of expenses do not vary with the occupancy of the property? variable expenses reserves for replacement fixed expenses

fixed expenses

"The periodic expenditures necessary to maintain the real estate and continue production of the effective gross income, assuming prudent and competent management" is the definition of _______________ expenses. fixed variable net operating operating

operating

When describing rates, what does the little "o" indicate in Ro? operating overhead optimum overall

overall

Typical replacement allowance items would NOT include roof plumbing repairs appliances boiler

plumbing repairs

With yield capitalization, the overall value is estimated by adding together the _______________ and the _______________of the reversion of capital. future worth of the income, present worth future worth of the income, future worth present worth of the income, present worth present worth of the gross income, future worth

present worth of the income, present worth

"The income due under existing leases" is the definition of _______________ rent. excess market economic scheduled

scheduled

"A method used to convert future benefits into present value by discounting each future benefit at an appropriate yield rate or by developing an overall rate that explicitly reflects the investment's income pattern, value change and yield rate" is the definition of direct capitalization discounted capitalization yield capitalization reversion capitalization

yield capitalization

A method of valuing property by discounting the anticipated income stream at an appropriate rate, plus discounting the value of the reversion is gross rent multiplier direct capitalization yield capitalization the cost approach

yield capitalization