Income Approach Flashcards
7 cards from real CGA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Income Approach flashcards as text
In the income approach, 'stabilized occupancy' refers to which condition?
Answer: The occupancy level a property would achieve under typical market management over the long run
Stabilized occupancy represents the expected long-term equilibrium occupancy, excluding temporary lease-up or unusual vacancy conditions.
A net lease requires the tenant to pay which expenses directly, in addition to base rent?
Answer: Property taxes, insurance, and maintenance costs
A triple-net (NNN) lease passes property taxes, insurance, and maintenance expenses directly to the tenant, reducing landlord operating costs.
Which method of estimating a capitalization rate involves analyzing the sale prices and NOIs of comparable income-producing properties?
Answer: Market extraction (sales comparison of cap rates)
Market extraction derives cap rates directly from the market by dividing each comparable's NOI by its verified sale price.
The debt coverage ratio (DCR) is calculated by dividing which two figures?
Answer: Net operating income by annual debt service
DCR = NOI ÷ Annual Debt Service; lenders use this ratio to assess whether property income adequately covers mortgage payments.
When appraising a hotel using the income approach, which income measure is most commonly used as the starting point?
Answer: Revenue per available room (RevPAR) and total revenue including ancillary income
Hotels generate income from rooms, food & beverage, and other departments, so total revenue including RevPAR analysis is the appropriate starting point.
In a leased fee estate valuation under the income approach, the appraiser must value which interest?
Answer: The landlord's ownership interest encumbered by existing leases
Leased fee estate is the landlord's ownership interest subject to the terms and conditions of existing leases.
Which adjustment is made to convert a property's actual vacancy rate to a 'credit loss' deduction in a reconstructed operating statement?
Answer: Collection loss allowance for tenants who occupy but fail to pay rent
Collection loss accounts for income lost when tenants default on rent obligations, distinct from physical vacancy where units are simply unoccupied.