CCIM CCR 1 - Financial Analysis: Questions With
Verified Solutions
Initial Investment Correct Ans - Purchase Price + Acquisition
Costs
Net Operating Income (NOI) Correct Ans - 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 Ans - Sale price - cost of sale
Holding Period Correct Ans - Time during which the
investment is held
Potential Rental Income Correct Ans - 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 Ans - 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 Ans - Potential rental income -
vacancy and credit losses
, Other income Correct Ans - Any income the property produces
other than rental income
Gross operating income Correct Ans - Effective rental income +
other income
Operating Expenses Correct Ans - 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 Ans - 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 Ans - - 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 Ans - It
doesn't consider:
- Appreciation or depreciation in future value (FV)
- Vacancy rate
- Operating Expenses
- Financial leverage or mortgage amortization
- Income taxes
- Risk
Verified Solutions
Initial Investment Correct Ans - Purchase Price + Acquisition
Costs
Net Operating Income (NOI) Correct Ans - 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 Ans - Sale price - cost of sale
Holding Period Correct Ans - Time during which the
investment is held
Potential Rental Income Correct Ans - 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 Ans - 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 Ans - Potential rental income -
vacancy and credit losses
, Other income Correct Ans - Any income the property produces
other than rental income
Gross operating income Correct Ans - Effective rental income +
other income
Operating Expenses Correct Ans - 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 Ans - 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 Ans - - 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 Ans - It
doesn't consider:
- Appreciation or depreciation in future value (FV)
- Vacancy rate
- Operating Expenses
- Financial leverage or mortgage amortization
- Income taxes
- Risk
