Property Valuation 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 Property Valuation flashcards as text
In ARGUS Enterprise, 'Expense Recoveries' or 'CAM Reimbursements' are best described as:
Answer: Additional income paid by tenants to reimburse landlord operating costs
Expense recoveries are income items where tenants reimburse the landlord for some or all operating expenses per their lease terms.
Which of the following best defines 'Effective Gross Income' (EGI) in an ARGUS model?
Answer: Gross potential income minus vacancy and credit loss plus miscellaneous income
EGI equals gross potential income less vacancy and credit loss, then plus any miscellaneous or ancillary income sources.
An ARGUS model projects a 10-year hold with a sale at the end. If the going-out cap rate is applied to Year 11 NOI, what is the resulting value called?
Answer: Reversion or Terminal Value
Capitalizing the stabilized NOI at the end of the hold period (often Year 11 or first year after sale) yields the reversion or terminal value used in the DCF.
In ARGUS, 'Tenant Improvement Allowances' (TI) directly impact valuation by:
Answer: Representing a capital outflow that reduces cash flow and net sale proceeds
TI allowances are landlord costs paid to build out tenant space, reducing cash available to investors and lowering property value in a DCF.
In ARGUS Enterprise, what does the 'Absorption & Turnover Vacancy' assumption account for?
Answer: The period of vacancy between a tenant's departure and a new tenant beginning to pay rent
Absorption & Turnover Vacancy models the downtime between leases when the space is vacant and no rent is being collected.
Which sensitivity analysis in ARGUS would most directly show the impact of changing market rents on property value?
Answer: Changing market rent growth rates across scenarios
Changing market rent growth rates directly affects projected leasing income, which flows through to NOI and ultimately the DCF-derived property value.
When ARGUS calculates a property's Net Present Value (NPV), a positive NPV indicates:
Answer: The investment generates returns above the required discount rate, adding value
A positive NPV means the present value of all future cash flows exceeds the investment cost, indicating returns above the investor's required rate of return.