BOMI EXAM
1. List the seven valuation criteria specific to real property: location and construction,
production of growth capital, production of income, durability, response to change, enhancement of activities within a
building, productivity
2. What is the difference between a capital investment and income?: Capital invest-
ment: is where monies are invested to produce or increase asset value. (not recognized until an asset is sold)
Income: is generated from the rental of a building that is reflected on an income statement during the period it was
earned.
3. Define churn rate.: the percentage of a space inventory that is reconfigured in some way (walls, furniture,
finishes, utilities) in a year.
4. What is the overall goal of the property manager?: Their goal is to keep the building full of
tenants and running eflciently, maximizing net income for the owner while minimizing risks.
5. Define investment ROI (return on investment) and capital ROI.: Investment ROI: is
the return on the investment while it is being held
Capital ROI: is the return on the investment when they are done with it.
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, 6. What are the four standard financial evaluation techniques typically applied
to investment/production decisions?: break-even (cost benefit) analysis, payback analysis, net pre-
sent value analysis, internal rate of return
7. Define the evaluation technique of payback analysis.: evaluates the length of time
required to pay the investor back for the quantity of capital inputs.
8. What do scarcity and utility mean, as they relate to the characteristics of real
estate?: Scarcity: Real estate is limited. The quantity of land on planet Earth is fixed with little possibility of creating
more.
Utility: Real estate has the power of an economic good. It fills a human need or provides a desired service.
9. While scarcity and utility are important, what is the most important factor
when considering real estate as an investment?: Location
10. Define "ad valorenm": Taxes that are collected from real estate owners by state and local governments
based on their property value.
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1. List the seven valuation criteria specific to real property: location and construction,
production of growth capital, production of income, durability, response to change, enhancement of activities within a
building, productivity
2. What is the difference between a capital investment and income?: Capital invest-
ment: is where monies are invested to produce or increase asset value. (not recognized until an asset is sold)
Income: is generated from the rental of a building that is reflected on an income statement during the period it was
earned.
3. Define churn rate.: the percentage of a space inventory that is reconfigured in some way (walls, furniture,
finishes, utilities) in a year.
4. What is the overall goal of the property manager?: Their goal is to keep the building full of
tenants and running eflciently, maximizing net income for the owner while minimizing risks.
5. Define investment ROI (return on investment) and capital ROI.: Investment ROI: is
the return on the investment while it is being held
Capital ROI: is the return on the investment when they are done with it.
1/2
, 6. What are the four standard financial evaluation techniques typically applied
to investment/production decisions?: break-even (cost benefit) analysis, payback analysis, net pre-
sent value analysis, internal rate of return
7. Define the evaluation technique of payback analysis.: evaluates the length of time
required to pay the investor back for the quantity of capital inputs.
8. What do scarcity and utility mean, as they relate to the characteristics of real
estate?: Scarcity: Real estate is limited. The quantity of land on planet Earth is fixed with little possibility of creating
more.
Utility: Real estate has the power of an economic good. It fills a human need or provides a desired service.
9. While scarcity and utility are important, what is the most important factor
when considering real estate as an investment?: Location
10. Define "ad valorenm": Taxes that are collected from real estate owners by state and local governments
based on their property value.
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