IAAO 102 EVALUATION SET ANSWERS AND
QUESTIONS SET A+
✔✔Rent per unit, rent per room, rent per space, rent per square foot, gross income
multiplier - ✔✔5 common units of comparison when comparing rental properties
✔✔Gross leasable area - ✔✔The total leasable area, including common areas is known
as _____.
✔✔Effective gross income - ✔✔The ________ is the potential gross income, less
vacancy & collection loss, plus appropriate miscellaneous income.
✔✔Miscellaneous income - ✔✔Income from vending machines and coin operated
laundry are examples of ______.
✔✔Potential gross income - ✔✔The first step in reconstructing the income & expense
statement is to determine the _____.
✔✔A) salaries
B) management
C) utilities
****all of the above*** - ✔✔Which of the following would be considered a proper
expense in the reconstructed operating expense statement?
✔✔Reserves for Replacement - ✔✔Expense amounts for short-lived items such as
carpet, drapes, and water heaters
✔✔Improper expense - ✔✔When reconstructing an income/expense statement,
depreciation and debt service would be considered a/an ____.
✔✔Net Operating Income - ✔✔The income remaining after developing effective gross
income & allowing for operating expenses & reserves for replacement is known as
____.
, ✔✔Rent Concessions - ✔✔_____ take the form of either free rent or extra tenant
improvement allowances
✔✔Leased fee value - ✔✔_____ tends to be less than fee simple value because leases
are typically set at market level when written, but usually fall below market levels as
time passes.
✔✔Class B buildings - ✔✔Generally a little older, but still have good quality
management and tenants
✔✔Effective rent - ✔✔______ is used as a common denominator to compare leases
with different provisions. This rent is the lease base rent less rent concessions.
✔✔Total expenses divided by effective gross income - ✔✔The formula to calculate an
operating expense ratio (OER) is: _________
✔✔Derivation from comparable sales, band of investment (mortgage & equity
components), net income ratio, debt coverage ratio, band of investment (land &
improvement components) - ✔✔5 methods of developing an overall cap rate (Ro)
✔✔Safe rate, risk rate, non-liquidity rate, management rate - ✔✔The summation
method of estimating an overall yield rate (Yo) (discount rate) is a theoretical method
which is based upon the sum of 4 components that affect the return on or requirements
of an investment. The 4 components are:
✔✔Land-to-improvement ratio, operating expense ratio, remaining economic life -
✔✔When developing the overall cap rate from market comparisons, 3 critical items
which must be highly comparable between comparable sales & the subject property are:
✔✔Annual mortgage constant - ✔✔Another name for the mortgage cap rate (Rm) is the
_____.
✔✔Band of investment - ✔✔The _____ technique computes a weighted average of the
mortgage cap rate (Rm) & equity cap rate (Re). The resulting weighted average is
called the overall cap rate (Ro).
✔✔Debt coverage ratio method - ✔✔The cap rate method most often used by lending
institutions is the _____.
✔✔Effective tax rate - ✔✔The _____ is the percentage that annual real estate taxes are
in relation to total property value.
✔✔EAT formula & market comparison - ✔✔2 methods of developing an ETR:
QUESTIONS SET A+
✔✔Rent per unit, rent per room, rent per space, rent per square foot, gross income
multiplier - ✔✔5 common units of comparison when comparing rental properties
✔✔Gross leasable area - ✔✔The total leasable area, including common areas is known
as _____.
✔✔Effective gross income - ✔✔The ________ is the potential gross income, less
vacancy & collection loss, plus appropriate miscellaneous income.
✔✔Miscellaneous income - ✔✔Income from vending machines and coin operated
laundry are examples of ______.
✔✔Potential gross income - ✔✔The first step in reconstructing the income & expense
statement is to determine the _____.
✔✔A) salaries
B) management
C) utilities
****all of the above*** - ✔✔Which of the following would be considered a proper
expense in the reconstructed operating expense statement?
✔✔Reserves for Replacement - ✔✔Expense amounts for short-lived items such as
carpet, drapes, and water heaters
✔✔Improper expense - ✔✔When reconstructing an income/expense statement,
depreciation and debt service would be considered a/an ____.
✔✔Net Operating Income - ✔✔The income remaining after developing effective gross
income & allowing for operating expenses & reserves for replacement is known as
____.
, ✔✔Rent Concessions - ✔✔_____ take the form of either free rent or extra tenant
improvement allowances
✔✔Leased fee value - ✔✔_____ tends to be less than fee simple value because leases
are typically set at market level when written, but usually fall below market levels as
time passes.
✔✔Class B buildings - ✔✔Generally a little older, but still have good quality
management and tenants
✔✔Effective rent - ✔✔______ is used as a common denominator to compare leases
with different provisions. This rent is the lease base rent less rent concessions.
✔✔Total expenses divided by effective gross income - ✔✔The formula to calculate an
operating expense ratio (OER) is: _________
✔✔Derivation from comparable sales, band of investment (mortgage & equity
components), net income ratio, debt coverage ratio, band of investment (land &
improvement components) - ✔✔5 methods of developing an overall cap rate (Ro)
✔✔Safe rate, risk rate, non-liquidity rate, management rate - ✔✔The summation
method of estimating an overall yield rate (Yo) (discount rate) is a theoretical method
which is based upon the sum of 4 components that affect the return on or requirements
of an investment. The 4 components are:
✔✔Land-to-improvement ratio, operating expense ratio, remaining economic life -
✔✔When developing the overall cap rate from market comparisons, 3 critical items
which must be highly comparable between comparable sales & the subject property are:
✔✔Annual mortgage constant - ✔✔Another name for the mortgage cap rate (Rm) is the
_____.
✔✔Band of investment - ✔✔The _____ technique computes a weighted average of the
mortgage cap rate (Rm) & equity cap rate (Re). The resulting weighted average is
called the overall cap rate (Ro).
✔✔Debt coverage ratio method - ✔✔The cap rate method most often used by lending
institutions is the _____.
✔✔Effective tax rate - ✔✔The _____ is the percentage that annual real estate taxes are
in relation to total property value.
✔✔EAT formula & market comparison - ✔✔2 methods of developing an ETR:
