Exam 8: Valuation Using the Income Approach

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?

Given the following information,calculate the effective gross income.Property: 4 office units,Contract rents per unit: $2500 per month,Vacancy and collection losses: 15%,Operating Expenses: $42,000,Capital Expenditures: 10%

Gross income multiplier analysis assumes that the subject and comparable properties are collecting market rents.Therefore,it is frequently argued that an income multiplier approach to valuation is most appropriate for which of the following property types?

Which of these is most likely to be regarded as a capital expenditure rather than an operating expense?

The process of converting periodic income into a value estimate is referred to as income capitalization.Income capitalization models can generally be categorized as either direct capitalization models or discounted cash flow models.Which of the following statements best describes the direct capitalization method?

Given the following information,calculate the appropriate going-in cap rate using general constant-growth formula.Overall market discount rate = 12%,Constant growth rate projection: 3% per year,Sale price: $1,950,000,Net operating income: $390,000,Potential gross income: $520,000.

When using discounted cash flow analysis for valuation,an appraiser will prepare a cash flow forecast,often referred to as a:

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:

When using discounted cash flow analysis for valuation,the appraiser must estimate the sale price at the end of the expected holding period.This price is referred to as the property's:

Given the following information,calculate the overall capitalization rate.Sale price: $950,000,Potential Gross Income: $250,000,Vacancy and Collection Losses: $50,000,and Operating Expenses: $50,000.

Operating expenses can be divided into two categories: variable and fixed expenses.Which of the following best exemplifies a fixed expense?

In calculating net operating income,vacancy losses must be subtracted from the gross income collected.The normal range for vacancy and collection losses for apartment,office,and retail properties is:

Which of the following measures is considered the fundamental determinate of market value for income-producing properties?

For smaller income-producing properties,appraisers may use the ratio of a property's selling price to its effective gross income.This is an example of a:

Given the following information,calculate the net operating income assuming below-line treatment.Property: 4 office units,Contract Rents per unit: $2500 per month,Vacancy and collection losses: 15%,Operating Expenses: $42,000,Capital Expenditures: 10%:

The starting point in calculating net operating income is the total annual income the property would produce assuming 100 percent occupancy and no collection losses.This is commonly referred to as:

Given the following information,calculate the appropriate going-in cap rate using mortgage-equity rate analysis.Mortgage financing = 75%,Typical debt financing cap rate: 10%,Sale price: $1,950,000,Net operating income: $390,000.

The going-in cap rate,or overall capitalization rate,is a measure of the relationship between a property's current income stream and its price or value.Which of the following statements regarding cap rates is true?

Given the following information,calculate the effective gross income multiplier.Sale price: $950,000,Potential Gross Income: $250,000,Vacancy and Collection Losses: 15%,and Miscellaneous Income: $50,000.

Most appraisers adhere to an "above-line" treatment of capital expenditures.This implies which of the following?