CCIM CCR 1 - Financial Analysis
UPDATED ACTUAL Questions and
CORRECT Answers
Initial Investment - CORRECT ANSWER - Purchase Price + Acquisition Costs
Net Operating Income (NOI) - CORRECT ANSWER - Potential rental income
- vacancy and credit losses
= Effective rental income
+ Other income
= Gross operating income
- Operating expenses
= Net Operating Income
Sale proceeds before tax - CORRECT ANSWER - Sale price - cost of sale
Holding Period - CORRECT ANSWER - Time during which the investment is held
Potential Rental Income - CORRECT ANSWER - The total amount of rental income for a
property if 100 percent occupied and any vacancies are rented at market rents.
Vacancy and credit losses - CORRECT ANSWER - The amount of rental income that is
lost because of vacancies or if the property is rented may not be collectible. This number is often
determined by looking at comparable properties that are rented at market rents.
Effective rental income - CORRECT ANSWER - Potential rental income - vacancy and
credit losses
, Other income - CORRECT ANSWER - Any income the property produces other than
rental income
Gross operating income - CORRECT ANSWER - Effective rental income + other income
Operating Expenses - CORRECT ANSWER - Those recurring amounts needed to keep the
property operating efficiently over time. These are NOT Capital Expenditures, such as roof
replacement, carpet replacement, and other major expenditures that recur periodically but usually
every several years.
Gross Rent Multiplier (GRM) - CORRECT ANSWER - Purchase Price divided by the
first-year potential rental income
Uses: (1) To quickly survey the market for opportunities (2) To value a property by using the
GRMs of very similar properties within the same market area
Gross Rent Multiplier (GRM) Advantages - CORRECT ANSWER - - Very little
information is required
- Information obtained easily
- Properties in similar market areas should have similar GRMs
- Investors may be familiar with the GRM and if not, it's easy to grasp
Gross Rent Multiplier (GRM) Disadvanages - CORRECT ANSWER - It doesn't consider:
- Appreciation or depreciation in future value (FV)
- Vacancy rate
- Operating Expenses
- Financial leverage or mortgage amortization
- Income taxes
- Risk
UPDATED ACTUAL Questions and
CORRECT Answers
Initial Investment - CORRECT ANSWER - Purchase Price + Acquisition Costs
Net Operating Income (NOI) - CORRECT ANSWER - Potential rental income
- vacancy and credit losses
= Effective rental income
+ Other income
= Gross operating income
- Operating expenses
= Net Operating Income
Sale proceeds before tax - CORRECT ANSWER - Sale price - cost of sale
Holding Period - CORRECT ANSWER - Time during which the investment is held
Potential Rental Income - CORRECT ANSWER - The total amount of rental income for a
property if 100 percent occupied and any vacancies are rented at market rents.
Vacancy and credit losses - CORRECT ANSWER - The amount of rental income that is
lost because of vacancies or if the property is rented may not be collectible. This number is often
determined by looking at comparable properties that are rented at market rents.
Effective rental income - CORRECT ANSWER - Potential rental income - vacancy and
credit losses
, Other income - CORRECT ANSWER - Any income the property produces other than
rental income
Gross operating income - CORRECT ANSWER - Effective rental income + other income
Operating Expenses - CORRECT ANSWER - Those recurring amounts needed to keep the
property operating efficiently over time. These are NOT Capital Expenditures, such as roof
replacement, carpet replacement, and other major expenditures that recur periodically but usually
every several years.
Gross Rent Multiplier (GRM) - CORRECT ANSWER - Purchase Price divided by the
first-year potential rental income
Uses: (1) To quickly survey the market for opportunities (2) To value a property by using the
GRMs of very similar properties within the same market area
Gross Rent Multiplier (GRM) Advantages - CORRECT ANSWER - - Very little
information is required
- Information obtained easily
- Properties in similar market areas should have similar GRMs
- Investors may be familiar with the GRM and if not, it's easy to grasp
Gross Rent Multiplier (GRM) Disadvanages - CORRECT ANSWER - It doesn't consider:
- Appreciation or depreciation in future value (FV)
- Vacancy rate
- Operating Expenses
- Financial leverage or mortgage amortization
- Income taxes
- Risk
