Investment Metrics Flashcards
7 cards from real ASC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Investment Metrics flashcards as text
In ARGUS Enterprise, the 'Gross Rent Multiplier' (GRM) is defined as:
Answer: Purchase price divided by annual gross potential rent
GRM = Purchase Price ÷ Annual Gross Potential Rent; it is a quick screening metric that ignores expenses and vacancy.
Which ARGUS metric measures the percentage of a property's gross potential income that must be collected just to break even on operating expenses and debt service?
Answer: Break-Even Occupancy Ratio
The Break-Even Occupancy Ratio = (Operating Expenses + Debt Service) ÷ Gross Potential Income, showing the minimum occupancy needed to cover all cash obligations.
In ARGUS Enterprise, 'cash-on-cash return' differs from 'IRR' primarily because cash-on-cash:
Answer: Measures only the current year's cash flow relative to equity invested
Cash-on-cash return = Current Year Before-Tax Cash Flow ÷ Equity Invested; it measures a single year's income return without considering future cash flows or the sale.
If a property's NOI grows at 3% annually and the terminal cap rate equals the going-in cap rate, the property's value at sale will:
Answer: Increase proportionally with NOI growth
When terminal cap rate = going-in cap rate, value = NOI ÷ cap rate; since NOI grows at 3%, the value also grows at 3% annually.
Which ARGUS Enterprise report best isolates the impact of leasing assumptions (rent, term, TI allowances) on total investment returns?
Answer: Lease-by-Lease Cash Flow Report
The Lease-by-Lease Cash Flow Report breaks out each tenant's contribution — rent, concessions, and TI — allowing direct analysis of leasing assumption impacts on returns.
A property is acquired at a 6.0% cap rate and sold five years later at a 5.5% cap rate. This cap rate compression:
Answer: Increases the reversion value above what NOI growth alone would produce
A lower exit cap rate means the same NOI is worth more at sale, boosting the reversion value beyond what NOI growth alone would generate.
In ARGUS Enterprise, the 'Expense Ratio' is defined as:
Answer: Total operating expenses divided by effective gross income
Expense Ratio = Total Operating Expenses ÷ Effective Gross Income (EGI); it indicates what share of collected income is consumed by operating costs.