Quiz #9
A property has a net operating income of $25,000, a market rate mortgage payment for $5,000 and the capitalization rate used in the market is 10%. What is the indicated value? $2,500,000 $250,000 $300,000 $325,000
$250,000
•Direct capitalization
-Uses a single year's income -Based on the ratio of property income to sale price
•Yield capitalization
-Uses multiple years' income -Based on the assumption that all investments are the present value of future cash flows
In using transaction data to determine the current value of the subject property, it is important to recognize that general market conditions may have changed since a particular transaction occurred. Property A sold 18 months ago for $235,000 and Property B sold 12 months ago for $215,000. If the two properties are priced today at $239,500 and $222,300, respectively, what is the average monthly rate of increase that can be used to adjust comparable prices for changes in market conditions? 0.09% 0.32% 0.19% 0.17%
.19%
Suppose that we observe two comparable properties that have each sold twice within the past two years. Property A sold 24 months ago for $350,000 and Property B sold 18 months ago for $325,000. If the two properties were sold today at $375,000 and $340,000, respectively, estimate the change in market conditions (percentage change in price) per month, assuming we equally weight the two properties in our analysis. 0.24% 0.33% 0.28% 0.19%
.28%
The expected costs to make replacements, alterations, or improvements to a building that materially prolong its life and increase its value is referred to as collection losses. capital expenditures. vacancy losses. operating expenses.
Capital expenditures
Potential gross income ( PGI) less vacancy and collection losses is known as Pre-tax cash flow Net operating income (NOI or IO) After-tax cash flow Effective gross income (EGI)
D
The dollar amount by which total rent exceeds base rent under a percentage lease for retail is referred to as: Percentage rent Excess rent Overage rent Marginal rent
Overage rent
One complication that appraisers may face is the variety of lease types that may be available for a particular property type. Which of the following statements best describes a graduated or step-up lease? The monthly rent remains fixed over the entire lease term. Rental rates are a function of the sales of the tenant's business. The lease establishes a schedule of rental rate increases over the term of the lease. Rental rate increases are indexed to the general rate of inflation.
The lease establishes a schedule of rental rate increases over the term of the lease.
At the conclusion of the traditional sales comparison approach to valuation, the appraiser evaluates and reconciles the final adjusted sale prices into a single value for the subject property. This single value is commonly referred to as replacement value. investment value. transaction value. indicated value.
indicated value
The subject property was built in 2010, and a comparable property was built in 1995. Assuming that new buildings are preferred over old ones, the adjustment for age of improvement in this case would be Positive No adjustment Negative Sometimes negative but sometimes positive, depending on the client
positive
Which of the following is not a variable expense? Janitorial expenses Management fees Utilities Real estate taxes
real estate taxes
EGI less fixed expenses and variable expenses=
NOI