CGA Property Maintenance & Operations 2

Question 1

A building's HVAC system requires replacement of the compressor unit. How should an appraiser classify this expenditure?

Accepted Answer

Capital expenditure requiring depreciation analysis

Answer

Replacing a major mechanical component like a compressor is a capital expenditure that extends useful life and must be analyzed for depreciation purposes.

Question 2

Which metric best measures the operational efficiency of a commercial property's maintenance program?

Accepted Answer

Operating expense ratio

Answer

The operating expense ratio (operating expenses divided by effective gross income) directly measures how efficiently a property's operations, including maintenance, are managed.

Question 3

A property manager defers roof repairs to reduce current-year expenses. How does this practice affect a general appraiser's income approach valuation?

Accepted Answer

It overstates NOI, potentially inflating value unless a deferred maintenance adjustment is applied

Answer

Deferring necessary repairs artificially inflates current NOI; appraisers must deduct estimated deferred maintenance costs to reflect true stabilized value.

Question 4

In appraising an older apartment complex, the appraiser notes that the plumbing system uses galvanized pipes with an estimated 5-year remaining useful life. This condition primarily represents:

Accepted Answer

Incurable physical deterioration

Answer

Short-remaining-life plumbing in an older building represents incurable physical deterioration when the cost to cure exceeds the value added.

Question 5

A triple-net (NNN) lease tenant is responsible for property taxes, insurance, and maintenance. How does this structure affect the landlord's operating expense load?

Accepted Answer

The landlord's operating expenses are substantially reduced, increasing NOI

Answer

Under NNN leases, the tenant absorbs major operating costs, significantly reducing the landlord's expense burden and increasing net operating income.

(CGA) Certified General Appraiser Practice Test

(CGA) Certified General Appraiser Practice Test

CGA Property Maintenance & Operations 2