IAAO 102 with 100% correct answers

Anticipation Value is created by the expectation of benefits to be derived in the future Substitution the prices, rents, and rates of return of property tend to be set by the current prices, rents and rates of return for equally desire able substitute properties. Contribution the value of a component of real estate can be measured by the amount it contributes to net operating income because net operating income can be capitalized into value. Market Value means the most probable price which a property should bring in a competitive and open market under all conditions. 5 Analysis Questions for Investors - 1. How much it cost? 2. How much will I get back? 3. When will I get it back? 4. What are the risk? 5. What are some comps ROI compared to my interested property? Leverage borrowing of funds in hopes of earning a greater return than the cost of the borrowed funds. This amount can be be negative, positive, or neutral. Mortgage most common type of financing for real estate. Junior Mortgage typical a second mortgage Chattel Mortgage a mortgage only on personal property. Amortized Mortgage Fixed rate mortgage permanent loan in which the sum of the principal and interest payments remains fixed throughout the term of the loan. Four factors to capture overall yield rate (Yô) - 1. Safe rate 2. Risk Rate 3. Rate for non-liquidity 4. Rate for Management Recapture Rate Provides for the return of the investment in the wasting portion of the assets. Effective Tax Rate (ETR) Reflect the relationship between the real estate taxes and the value of the property. Income Approach One of the three approaches to value in which the appraiser derives a value indication by converting anticipated benefits through ownership of income -producing property is the ______________ What's a lease? Considered both a contract and conveyance Month to Month Lease short term lease that May or may not me in written form. This type of lease provides no security for the tenant or landlord. Percentage Lease a contract which calls for a fixed minimum base rent and a variable rent. Gross Lease the landlord is required to pay all operating expenses associated with the real estate. Net Lease the tenant is required to pay all or part of the operating expenses associated with the real estate. Tenant improvements Terms of lease where it explains the extent of the work that the landlord is willing to do in the form of a building or improvement allowance. Types of Rents - 1. Market Rent 2. Contract Rent 3. Excess Rent 4. Percentage Rent 5. Deficit Rent 6. Effective Rent Gross Leasable Area (GLA) includes the entire area of the building Net Leasable Area (NLA) includes only the floor area occupied by the tenant. Gross Income Multiplier relationship between Effective gross income (EGI) and the sales prices or property value Misc. Income some misc income could be parking fees, vending machines, coin operated laundries, etc Effective Gross Income (EGI) obtained after determining the potential income for the property What kind of expenses are capital improvements? Improper Expenses. Percentage Lease a contract that requires a fixed minimum base event based on volume of business, sales, productivity, or use of the property by the tenant is called ___________ Five Methods of Developing an overall capitalization rate - 1. Derivation from comparable **** This is the one on the test 2. Band of Investment Technique (Mortgage & Equity Components) 3. Net Income Ratio 4. Debt coverage ratio 5. Band of Investment Technique (LAND AND IMPROVEMENT COMPONENTS) Mortgage Capitalization Rate is the ratio of the annual principal and interest payments to the amount borrowed.