Assume you have an apartment complex with the following market rentals, a vacany rate of 5% and other income of $500 a month.

5 one bedroom units @ $800 each

2 two bedroom units @ $1000 each

4 three bedroom units @ $1500 each

What is the PGI (potential grosss income)?

Question 1 options:

1)

$120,000

2)

$136,800

3)

$144,000

4)

$150,000

5)

$160,000

Save

Question 2 (2 points)

When a lack of sufficient comparables precludes the use of a directly extracted Ro, a reasonable estimate of Ro can be obtained using the band of investment model, because the relatively certain loan constant dominates Ro.

Question 2 options:

1)

True

2)

False

Save

Question 3 (2 points)

In the band of investment model we use Rm, the cash return to the lender, and Re, the equity capitalization rate. Which of the following statements is correct?

Question 3 options:

1)	because there is greater risks associated with equity, Re will be greater than Rm

2)	because there is greater risks associated with debt, Rm will be greater than Re

3)	both Rm and Re are yield rates

4)	Rm and Re are one-year returns and don't directly reflect future returns, therefore Re will often be greater than Rm due to expected growth in income and appreciation of the property

5)	none of the above

Save

Question 4 (2 points)

Which of the following would not have an impact upon the estimate of stabilized NOI?

Question 4 options:

1)	lease concessions

2)	inadequate replacement reserves

3)	deferred maintenance

4)	depreciation deductions

Save

Question 5 (2 points)

The gross income multiplier method estimates market value by

Question 5 options:

1)	capitalizing NOI(net operating income)

2)	multiplying gross income of the subject property by a multipler derived from the market

3)	capitalizing gross income

4)	separating the income attributable to the land from that attributable to the building

Save

Question 6 (2 points)

In developing an estimate of stabilized NOI, the appraiser should consider

Question 6 options:

1)	lease concessions

2)	deferred maintenance

3)	components with economic lives less than that of the building

4)	all of the above

Save

Question 7 (2 points)

Even though GIMs are part of the income approach on the Uniform Residential Appraisal Report, some appraisers include them as part of the direct sales comparison approach.

Question 7 options:

1)

True

2)

False

Save

Question 8 (2 points)

Rm and Re are one-year capitalization rates and don't directly reflect future returns, therefore Re will often be greater than Rm due to expected growth in income and appreciation of the property.

Question 8 options:

1)

True

2)

False

Save

Question 9 (2 points)

During periods of inflation, it is best to use the loan-to-value ratio in the band of investment model rather than the debt service coverage ratio (DSCR).

Question 9 options:

1)

True

2)

False

Save

Question 10 (2 points)

When using the band of investment method it is important that "typical" financing terms are used.

Question 10 options:

1)

True

2)

False

Save

Question 11 (2 points)

Overage rent is the

Question 11 options:

1)	actual rent over the lease term

2)	percentage rent above guaranteed minimum rent

3)	amount by which contract rent exceeds market rent

4)	amount by which gross rent exceeds net rent

Save

Question 12 (2 points)

When there is a difference in the operating expense ratios between otherwise comparable properties, the appraiser should use a measure like the GIM rather than an overall cap rate (Ro).

Question 12 options:

1)

True

2)

False

Save

Question 13 (2 points)

What is the estimated stabilized anticipated annual income produced by the property being appraised after all operating expenses and reserves are deducted, but before mortgage debt service is deducted?

Question 13 options:

1)	PGI - potential gross income

2)	BTCF - before tax cash flow

3)	NOI - net operating income

4)	EGI - effective gross income

Save

Question 14 (2 points)

The band of investment model is nothing more than a disaggregation of Ro into its debt and equity components.

Question 14 options:

1)

True

2)

False

Save

Question 15 (2 points)

Which of the following would not be an operating expense?

Question 15 options:

1)	real estate taxes

2)	debt service

3)	replacement reserve

4)	insurance premiums

Save

Question 16 (2 points)

When calculating the before-tax cash flow,

Question 16 options:

1)	debt service payments are ignored

2)	debt service payments are deducted from the net operating income

3)	gross potential income is deducted from the gross rental receipts

4)	debt service is deducted from the gross effective income

Save

Question 17 (2 points)

Which type of lease stipulates that the lessor pays all operating expenses of the real estate?

Question 17 options:

1)	index lease

2)	percentage lease

3)	flat rental lease

4)	net rental lease

5)	gross rental lease

Save

Question 18 (2 points)

The overall cap rate (Ro) is the reciprocal of the GIM.

Question 18 options:

1)

True

2)

False

Save

Question 19 (2 points)

Suppose you project the following information for a given property: constant NOI is $50,000; loan-to-value ratio is .80; mortgage constant is 0.1523; and the equity dividend rate is 10%. The estimated value of the property is

Question 19 options:

1)

$352,510

2)

$401,320

3)

$450,830

4)

$500,000

5)	can not be determined with the information given

Save

Question 20 (2 points)

The income approach is based on which appraisal principle?

Question 20 options:

1)	Principle of substitution

2)	Principle of anticipation

3)	Principle of increasing and decreasing returns

4)	Principle of conformity

Save

Question 21 (2 points)

The band of investment approach in calculating the capitalization rate is determined by adding together a safe return, risk premium, illiquidity premium, and management fee.

Question 21 options:

1)

True

2)

False

Save

Question 22 (2 points)

Under what type of lease is some (or all) of the rent is tied to the productivity of the leased space?

Question 22 options:

1)	graduated rental lease

2)	periodic revaluation

3)	percentage lease

4)	indexed lease

Save

Question 23 (2 points)

The property you are appraising is a five-story office building. Each floor has 10,000 square feet of rentable space and is suitable for single occupancy. Two tenants have leases. Floor 3 is occupied under a five-year lease with three years remaining. The current rental is $128,600 per year. Floor 4 is occupied under a new five-year lease and the rent is $150,000 per year. Floors 1, 2, and 5 are vacant. The rent being paid for the fourth floor is considered current market rent. The first floor is expected to bring a rent premium of 15% because of its visibility and commercial potential. The fifth floor is expected to bring a 10% premium because of its view. There is a strong demand for the space available in this building. Rent levels in the next five years are expected to increase 8% on an annual compounding basis as they have in the last two years. All future leases will be for three-year terms. What is the total rent projected in year 1?

Question 23 options:

1)

$766,100

2)

$728,000

3)

$809,000

4)	none of the above

Save

Question 24 (2 points)

Based on the information in the above question (#23), what is the total rent projected for year 3?

Question 24 options:

1)

$766,100

2)

$728,000

3)

$809,000

4)	none of the above

Save

Question 25 (2 points)

Again, using the information in question #23, what is the total rent projected for year 5?

Question 25 options:

1)

$766,100

2)

$728,000

3)

$809,000

4)	none of the above

Save