Real Estate Appraisal

QUESTION 9

1. An overall capitalization rate is

   		The yield rate of the investment
   		The yield rate of the mortgage
   		The ratio of the mortgage payments to the amount of the loan
   		The ratio of one years income to value for the entire property

1 points

QUESTION 10

1. Effective gross income (EGI) less operating expenses and reserves (if applicable) is known as

   		Potential gross income (PGI)
   		After-tax cash flow
   		Pre-tax cash flow
   		Net operating income (NOI)

1 points

QUESTION 11

1. The subject property is expected to generate net operating income (NOI) over the next five years as shown in the following table. The resale of the property is estimated at $5 million at the end of the fifth year. The closing costs are estimated at 5% of the sale price. The discount rate is 9.5%. Cash flows are at the end of each year. What is the value of this investment? Round your answer to the nearest $1,000.

   Net Operating Income

   Year	Net Income
   1	$ 250,000
   2	$ 300,000
   3	$ 350,000
   4	$ 400,000
   5	$ 450,000
   Net Resale	$4,750,000
   Disc. Rate	9.50%

   		$3,904,000
   		$4,065,000
   		$4,327,000
   		$4,500,000

1 points

QUESTION 12

1. The cost approach is typically very effective when

   		The cost of construction is difficult to ascertain
   		The depreciation estimate is a large percentage
   		The improvements are old but still functional
   		The improvements are new and represent the highest and best use of the site