Exam (elaborations)
REE 4103 EXAM QUESTIONS (1)
REE 4103 EXAM QUESTIONS (1)
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REE 4103 EXAM QUESTIONSAn allowance for vacancy and collection loss is estimated as a percentage of: -
ANS-Potential Growth Income
The anticipated income that remains after deducting all operating expenses from
effective gross income but before mortgage debt service is: - ANS-Net Operating
income
A _______________ would have the lowest ratio of operating expenses to gross
income incurred by the landlord. - ANS-triple-net (absolute net)
The operating expense ratio for income property is typically: - ANS-the complement of
the NOI ratio
In determining income and expenses the first step is: - ANS-a lease and rental analysis
Effective gross income is income after an allowance for - ANS-vacancy rates
In a high rise 100-unit apartment building there is a basement laundry area that brings
in $500 monthly from the concessionaire. The laundry income is: - ANS-Added to
before-tax cash flow
In an appraisal of income property, which of the following items should be excluded from
the expense statement? - ANS-Depreciation
Overage rent is the: - ANS-percentage rent over the guaranteed minimum
In an operating statement the painting and redecorating of an apartment unit is included
in what line item: - ANS-operating expense
A reconstructed operating statement for an owner operated property should include -
ANS-· Management expense (ex: Have to reconstruct it because there's no way a
manager should be paid, say $5,000 / yr at market)
Rental data would not include: - ANS-
Which of the following is an example of a specific expense item rather than a category?
- ANS-Property Taxes
, 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 (lower occupancy factor) than was found for one bedroom
The subject property has 95% occupancy. What conclusion would you most likely draw
if the typical occupancy rate in the area were only 85%? - ANS-The rent might be lower
in the 95% property (and too low for the market). So the value would end up being the
same because even though the occupancy is higher, the rent is lower. Or another
answer could be it's nicer than the others (but then if it's that nice, the rent is probably
still too low)
The total income anticipated from income property operations after vacancy and
collection losses are deducted is: - ANS-Expected Gross Income
Which approach would involve an investigation of the rent schedules of the subject
property and the comparables? - ANS-Income Approach
All of the following relate to the rent level or payment schedule of a lease except: -
ANS-Financing of the property
In direct capitalization which of the following cannot be converted into value estimates -
ANS-(direct capitalization: widely used to value non residential properties with stabilized
income & predictable expenses; value estimate based on single years noi divided by
cap rate) (can convert: Single tenant industrial building)
If your capitalization rate is 12%, what is the value difference between a Net operating
Income of $48,000 and $70,000? - ANS-183,333
($583,333 - $400,000)
V = I/R = 48,000 / .12 = $400,000
V = I/R = 70,000 / .12 = $583,333
Lease renewals or extensions negotiated with existing tenants: - ANS-Revaluation
Lease
When does an appraiser need to describe the source of information and verification of
lease terms? - ANS-Scope of work
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