REE 4103 FSU FINAL
*Comparable Sale A was recently sold for $700,000. Assume the PGI of the property is
$300,000 and its effective gross income is $220,000. The operating expense ratio of the
property is 75%. What is the overall capitalization rate extracted from the effective gross
income multiplier of Sale A?* - ANS-7.86%
*If the Net Operating Income for the subject property is determined to be $45,000/year.
The Net Operating Income and the Value of the property are expected to grow at 5%
each year. The Discount rate is determined to be 12% what is the indicated value of the
property.* - ANS-$642,857.14
A _______________ would have the lowest ratio of operating expenses to gross
income incurred by the landlord. - ANS-
A demonstration narrative appraisal report: - ANS-
A forecast using discounted cash flow analysis would include: - ANS-
A formal appraisal report must include the: - ANS-
A gross lease is one that: - ANS-Landlord pays for all operating expenses
A gross rent multiplier is valid when the subject and comparable properties have similar:
- ANS-
A lease clause that limits the expenses of the landlord is termed a: - ANS-
A lease on a 8,000 square foot industrial building, where the rent is specified as
$3,500/month, for a 5-year term with level income throughout the lease term. When the
lease was negotiated, the tenant received free rent for the first month of each year as a
concession. What is the effective rent per square foot per year? - ANS-$4.81
Solve by: 3,500*11 = 38500/8000 = 4.81
A lease which provides for rental changes annually tied to the consumer price index is
what kind of lease? - ANS-Index Lease
,A lease which requires the landlord and tenant to arbitrate the amount of the lease upon
the tenant exercising a lease extension option is what type of lease? -
ANS-Reevaluation Lease
A lease with the following annual payments: Year 1: $10,000 Year 2: $12,000 Year 3:
$14,000 Year 4: $16,000; would be called what type of lease? - ANS-
A property forecasted to produce $55,000 of gross income, and which sells for
$475,000 is said to have sold at a GIM of? - ANS-8.64
Solve by: V = I * IM
475,000 = 55,000 * IM
A property has potential gross income of $30,000, effective gross income of $27,000,
and operating expenses of $8,100. What is the operating expense ratio? - ANS-30%
Solve by:
EGI / OE
A property sold for $555,000. The buyer anticipated the potential gross income would
be $93,000, the vacancy would be 5%, and expenses would be 53% of EGI in the year
after the purchase. What is the overall capitalization rate (RO)? - ANS-7.48%
Formulas:
PGI - V&C = EGI - OE = NOI
Value = NOI / Ro
Solve by:
93000 - (93000*.05)
= 88350 - (88350*.53)
= 41524.
= 7.48%
A reconstructed operating statement for an owner operated property should include: -
ANS-• Vacancy and Collection Loss
• Effective Gross Income
• Operating Expenses
• Fixed Expenses
• Variable Expenses
• Replacement Allowance
• Total Operating Expenses
• Net Operating Income
• Additional Calculations
• Mortgage debt service, Equity Dividend, Expense & Income Ratios
, A rent multiplier: - ANS-
A rent survey reveals that apartment buildings offering one-bedroom units have a
considerably higher occupancy factor than those with two-bedroom units. If the subject
property includes only units with two bedrooms, the appraisal should probably project: -
ANS-A higher vacancy factor than was found for one bedroom units
A revaluation lease - ANS-provides for periodic rent adjustments based on the market
rental rate of the space
A small office building sold for $120,000. The monthly net operating income is $1,300
per MONTH. What was the overall capitalization rate? - ANS-13 percent
Solve by:
(1300*12) / 120000
A technique of income capitalization in which the analyst need not distinguish interest
rates from capital recovery rates, but is most useful for comparable income properties: -
ANS-Direct Capitalization
A tenant who has an Exclusive Use Clause with a landlord, where the landlord later
allows a competing tenant in the same shopping center may: - ANS-Exerciser the
clause in a lawsuit
A transmittal letter does not include: - ANS-
A value range is never: - ANS-wide or narrow
All are used in valuation of income-producing property except:
Rental rates
Operating expenses
Income taxes
Net leasable area - ANS-Income taxes
All of the following lease provisions are advantageous to the lessee except -
ANS-Escalation Clause
All of the following relate to the rent level or payment schedule of a lease except: - ANS-
*Comparable Sale A was recently sold for $700,000. Assume the PGI of the property is
$300,000 and its effective gross income is $220,000. The operating expense ratio of the
property is 75%. What is the overall capitalization rate extracted from the effective gross
income multiplier of Sale A?* - ANS-7.86%
*If the Net Operating Income for the subject property is determined to be $45,000/year.
The Net Operating Income and the Value of the property are expected to grow at 5%
each year. The Discount rate is determined to be 12% what is the indicated value of the
property.* - ANS-$642,857.14
A _______________ would have the lowest ratio of operating expenses to gross
income incurred by the landlord. - ANS-
A demonstration narrative appraisal report: - ANS-
A forecast using discounted cash flow analysis would include: - ANS-
A formal appraisal report must include the: - ANS-
A gross lease is one that: - ANS-Landlord pays for all operating expenses
A gross rent multiplier is valid when the subject and comparable properties have similar:
- ANS-
A lease clause that limits the expenses of the landlord is termed a: - ANS-
A lease on a 8,000 square foot industrial building, where the rent is specified as
$3,500/month, for a 5-year term with level income throughout the lease term. When the
lease was negotiated, the tenant received free rent for the first month of each year as a
concession. What is the effective rent per square foot per year? - ANS-$4.81
Solve by: 3,500*11 = 38500/8000 = 4.81
A lease which provides for rental changes annually tied to the consumer price index is
what kind of lease? - ANS-Index Lease
,A lease which requires the landlord and tenant to arbitrate the amount of the lease upon
the tenant exercising a lease extension option is what type of lease? -
ANS-Reevaluation Lease
A lease with the following annual payments: Year 1: $10,000 Year 2: $12,000 Year 3:
$14,000 Year 4: $16,000; would be called what type of lease? - ANS-
A property forecasted to produce $55,000 of gross income, and which sells for
$475,000 is said to have sold at a GIM of? - ANS-8.64
Solve by: V = I * IM
475,000 = 55,000 * IM
A property has potential gross income of $30,000, effective gross income of $27,000,
and operating expenses of $8,100. What is the operating expense ratio? - ANS-30%
Solve by:
EGI / OE
A property sold for $555,000. The buyer anticipated the potential gross income would
be $93,000, the vacancy would be 5%, and expenses would be 53% of EGI in the year
after the purchase. What is the overall capitalization rate (RO)? - ANS-7.48%
Formulas:
PGI - V&C = EGI - OE = NOI
Value = NOI / Ro
Solve by:
93000 - (93000*.05)
= 88350 - (88350*.53)
= 41524.
= 7.48%
A reconstructed operating statement for an owner operated property should include: -
ANS-• Vacancy and Collection Loss
• Effective Gross Income
• Operating Expenses
• Fixed Expenses
• Variable Expenses
• Replacement Allowance
• Total Operating Expenses
• Net Operating Income
• Additional Calculations
• Mortgage debt service, Equity Dividend, Expense & Income Ratios
, A rent multiplier: - ANS-
A rent survey reveals that apartment buildings offering one-bedroom units have a
considerably higher occupancy factor than those with two-bedroom units. If the subject
property includes only units with two bedrooms, the appraisal should probably project: -
ANS-A higher vacancy factor than was found for one bedroom units
A revaluation lease - ANS-provides for periodic rent adjustments based on the market
rental rate of the space
A small office building sold for $120,000. The monthly net operating income is $1,300
per MONTH. What was the overall capitalization rate? - ANS-13 percent
Solve by:
(1300*12) / 120000
A technique of income capitalization in which the analyst need not distinguish interest
rates from capital recovery rates, but is most useful for comparable income properties: -
ANS-Direct Capitalization
A tenant who has an Exclusive Use Clause with a landlord, where the landlord later
allows a competing tenant in the same shopping center may: - ANS-Exerciser the
clause in a lawsuit
A transmittal letter does not include: - ANS-
A value range is never: - ANS-wide or narrow
All are used in valuation of income-producing property except:
Rental rates
Operating expenses
Income taxes
Net leasable area - ANS-Income taxes
All of the following lease provisions are advantageous to the lessee except -
ANS-Escalation Clause
All of the following relate to the rent level or payment schedule of a lease except: - ANS-
