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REE 5305 Mid-term 1 (1).
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REE 5305 Mid-term 1 (1).
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REE 5305 Mid-term 1Federal income tax policy has generally been thought to...? - ANS-Operating expenses
associated with the maintenance and upkeep of an owner-occupied residential property are
generally tax deductible.
Residential appraisers use only the sales comparison approach to determine value of the
homes they appraise. - ANS-Operating expenses associated with the maintenance and upkeep
of an owner-occupied residential property are generally tax deductible.
Which of the following does the term "in-line tenants" refer to? - ANS-In-Line tenants are
generally smaller retailers that hope to generate retail sales as a result of the traffic produced by
the larger retailers or anchor tenants
Overage rent is rent that exceeds expenses. - ANS-The dollar amount by which the total rent
exceeds the base rent is considered overage rent.
Which of the following expenses would NOT be included in an operating statement used to
calculate net operating income in the income approach to value? - ANS-Taxes, Maintenance,
and Reserves for Replacement are considered in NOI, but not capital additions.
Return on investment and change in net operating income are essential factors for cost
analysis. - ANS-ROI and NOI include a revenue portion and are not considered when only
looking at costs.
The minimum lenders typically require for DCR in the first year is: - ANS-Lenders typically want
DCR to meet or exceed 1.2 in the first year.
Expense stops shift the risk of increases in expenses to the lessee while allowing the lessor to
retain the benefit of any decrease in expenses. - ANS-True - in this relationship the lessee pays
anything in excess of the agreed upon expense stop, but they pay the full amount of rent so if
those expenses are less than the expense stop the land lord/lessor still receives the full rent
payment.
Which of the following includes income from real estate classified as capital assets? -
ANS-Portfolio income includes dividends from stocks and bond and from real estate classified
as a capital asset.
Operating expenses associated with the maintenance and upkeep of an owner-occupied
residential property are generally tax deductible. - ANS-Operating expenses for owner occupied
residential properties cannot be deducted for tax purposes.
, When a homeowner improves some aspect of his property far in excess of comparable
properties in the neighborhood, he is said to have: - ANS-Overimproved the property. When an
owner invests more in improving the property than the market is willing to pay for those
improvements then they have overimproved the property and those improvements may not be
included in the sales price.
When the value of public goods exceeds their cost, the effect on house prices is called the
"capitalization effect." - ANS-True - when the quality of the public services exceeds what you
pay for them in terms of taxes and fees then it is referred to as the capitalization effect.
Which of the following is FALSE regarding cap rates? - ANS-???
To attract anchor tenants, property owners tend to charge them lower rents. They make up for
the lower rents by charging the anchor tenant higher CAM charges. - ANS-False - anchor
tenants will usually pay less for CAM space. Hence the in-line tenant.
Which is of the following is NOT normally considered when conducting an appraisal using the
cost approach? - ANS-Capitalization Rate - this is a point in time measure of the income earned
is excess of the costs. Income is not considered in a cost only analysis.
When using the gross income multiplier technique in conjunction with the income approach to
valuation, potential gross income is preferred to effective gross income. - ANS-False - either
potential or effective gross income can be used when using the gross income multiplier
technique.
In making an investment decision, IRR analysis will lead to a different "go/no-go" decision than
NPV analysis. - ANS-False - they should lead to the same conclusion.
The deductibility of depreciation in calculating taxable income will usually cause the effective tax
rate to be lower than the actual tax rate. - ANS-True - the deductibility of depreciation usually
leads to lower effective tax rate versus actual tax rate.
An appraisal usually contains three approaches to valuation. Which of the following is NOT one
of those approaches - ANS-The Ratio approach
Estimating the land value for an improved property cannot be accomplished using the sales
comparison method of valuation. (T/F) - ANS-False - the sales comparison approach is a
common approach used to appraise the value of property.
Income after deducting loss of rents due to vacancy and nonpayment of rents, as well as any
concessions, is referred to as: - ANS-Effective Gross Income
The great majority of businesses lease the space they occupy rather than purchasing it outright.
(T/F) - ANS-True
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