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Real Estate Final Exam Prep
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Terms in this set (26)
If gross income on a property is 30,000, net income is $20,000 and the cap rate is 5%, the value of the property using the income capitalization method is
$600,000.
$400,000.
$6,000,000.
$4,000,000.
Remember that value is calculated using the NOI of a property, not the gross income. Value = NOI / Cap rate. So, Value = $20,000 / 0.05 = $400,000.
A property is being appraised using the income capitalization approach. Annually, it has potential gross income of $30,000, vacancy and credit losses of $1,500, and operating expenses of $10,000. Using a capitalization rate of 9%, what is the indicated value (to the nearest $1,000)?
$206,000
$167,000
$222,000
$180,000
Remember the formula for calculating value, Value = NOI / Cap rate. First, determine the net income by subtracting out vacancy and expenses from the potential gross income, $30,000 - 1,500 - 10,000 = $18,500 NOI. Next, divide $18,500 divide by the capitalization rate, 0.09: $18,500 / 0.09 = $205,555, or $206,000 rounded.
A building has 5 office suites generating annual potential rent of $20,000 each. If the annual vacancy rate is 10% and the annual expenses are $45,000, what is the NOI?
$20,000 per unit x 5 = $100,000 potential gross income. Next, subtract the 10% vacancy rate: $100,000 - $10,000 = $90,000. Then subtract the $45,000 for expenses: $90,000 - $45,000 = $45,000 NOI.
$20,000 per unit x 5 = $100,000 potential gross income. Next, subtract the 10% vacancy rate: $100,000 - $10,000 = $90,000. Then subtract the $45,000 for expenses: $90,000 - $45,000 = $45,000 NOI.
A comparable property has 4 bedrooms and the subject has 3 bedrooms. If bedrooms are valued at $30,000, how would you adjust a CMA to account for this?
Subtract $30,000 from the value of the comparable.
An apartment building that sold for $450,000 had monthly gross rent receipts of $3,000. What is its monthly gross rent multiplier?
GRM = Price / Monthly Rent. Thus, $450,000 / $3,000 = 150
GRM = Price / Monthly Rent. Thus, $450,000 / $3,000 = 150
A rental house has monthly gross income of $1,200. A suitable gross income multiplier derived from market data is 14.1. What estimated sale price (to the nearest $1,000) is indicated?
GIM = Price / Annual Income. To solve for price convert the formula to Price = GIM x Annual Income. Thus, ($1,200 x 12) equals $14,400 annual income. ($14,400 x 14.1 GIM) = $203,040, or $203,000 rounded.
A property is being appraised by the cost approach. The appraiser estimates that the land is worth $10,000 and the replacement cost of the improvements is $75,000. Total depreciation from all causes is $7,000. What is the indicated value of the property?
Cost Approach formula: Land + (Cost of Improvements + Capital Additions - Depreciation) = Value. Thus you have $10,000 + ($75,000 - 7,000), or $78,000.
A property is purchased for $200,000. Improvements account for 75% of the value. Given a 39-year depreciation term, what is the annual depreciation expense?
$3,846
$5,128
$6,410
$8,294
Since only the improvement portion of the property can be depreciated, the depreciable basis is $200,000 x 75%, or $150,000. The annual depreciation expense is $150,000 / 39 years, or $3,846.
An investor just purchased a rectangular 1-acre retail lot for $250 a frontage foot. If she paid $100,000 total, what was the depth of the lot?
109 feet
400 feet
174 feet
250 feet
5 of 6 - Jamie Spiffup advised her clients they needed to paint their living room before showing the property. The walls of these rooms were all 10' high. The wall lengths were 16', 20', 16', and 20'. If a gallon of paint covers 200 SF, how many whole gallons would the sellers have to buy?
2
3
4
5
You answered correctly
6 of 6 - Calculate how many acres are in the Southwestern 1/4 of the Northern 1/2 of the Eastern 1/2 of Section 14.
20
40
80
120
You answered correctly
$100,000 ÷ $250 = 400', 1 acre = 43,560 s/f, 43,560 s/f ÷ 400' = 109'
2 of 6 - If a square-shaped lot measures 200' on one side, what is the square footage of the lot?
4,000
40,000
400
40
40,000
3 of 6 - What is 75% converted to a decimal?
75.0
7.50
0.75
0.075
0.75
4 of 6 - Terry bought a home that home that had an attached one-car garage and a screened porch that spanned the length of the home. If the garage measured 16' in depth which was half the depth of the house and the screened porch was 64' in width, what is the GLA of the house?
1,024 SF
2,048 SF
3,072 SF
4,096 SF
2,048
Jamie Spiffup advised her clients they needed to paint their living room before showing the property. The walls of these rooms were all 10' high. The wall lengths were 16', 20', 16', and 20'. If a gallon of paint covers 200 SF, how many whole gallons would the sellers have to buy?
2
3
4
5
4
Calculate how many acres are in the Southwestern 1/4 of the Northern 1/2 of the Eastern 1/2 of Section 14.
20
40
80
120
40
What is the GRM of a gas station with monthly rent of $8,700 and a value of $970,000?
89.7
111.5
124.4
99.9
111.5
What is the GRM of a condominium with monthly rent of $1,700 and a value of $240,000?
70.8
112.5
141.2
88.5
141.2
A commercial property sold recently for $620,000. The property had an NOI, or net income, of $45,000. What was the capitalization rate at which this property sold?
0.072
0.138
0.045
0.062
0.072
A property's value is $400,000 and its land value is $75,000. Assuming a depreciation term of 39 years, what is the amount of annual depreciation?
$10,256
$1,923
$8,333
$7,875
$400,000 - $75,000 = $325,000, $$325,000 ÷ 39 = $8,333
The subject property does not have a pool or a screen porch. A comparable that sold for $205,000 has a $1,000 screen porch, one more $2,500 half-bathroom, and a $6,000 pool. Assuming all else is equal, what is the adjusted value of the comparable?
$200,500
$195,500
$214,500
$207,500
$195,000
A property is being appraised by the cost approach. The appraiser estimates that the land is worth $17,000 and the replacement cost of the improvements is $235,000. Total depreciation from all causes is $23,000. What is the indicated value of the property?
$229,000
$275,000
$252,000
$212,000
$229,000
The owner of a $200,000 property decided to buy a new $15,000 roof (which added no value to the property). The economic life of the roof is 12 years. Assuming the straight-line method of depreciation, what is the depreciated value of the property (attributable to the roof) after 2 years?
$202,500
$200,000
$197,500
$187,500
$197,500
An apartment building that sold for $900,000 had monthly gross rent receipts of $7,000. What was its monthly gross rent multiplier?
128.5
150
119.75
114
128.5
If gross income on a property is $84,000, net income is $40,000 and the cap rate is 7%, the value of the property using the income capitalization method is? (Round to the nearest $100)
$1,200,000
$571,400
$628,600
$721,500
$571,400
A property has a net income of $770,000 and sells for $9,800,000. What is its cap rate?
0.079
0.127
0.092
0.113
$770,000 ÷ $9,800,000 = 0.079 cap rate
What is the GRM of a condominium with monthly rent of $1,700 and a value of $240,000?
70.8
112.5
141.2
88.5
141.2
The subject property does not have a pool or a screen porch. A comparable that sold for $205,000 has a $1,000 screen porch, one more $2,500 half-bathroom, and a $6,000 pool. Assuming all else is equal, what is the adjusted value of the comparable?
$200,500
$195,500
$214,500
$207,500
$205,000 - $1,000 - $2,500 - $6,000 = $195,500
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