Market Analysis & Valuation Flashcards
7 cards from real CLP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Market Analysis & Valuation flashcards as text
What is the correct formula for calculating Net Operating Income (NOI)?
Answer: Gross Potential Income minus Vacancy Loss minus Operating Expenses
NOI equals Gross Potential Income minus vacancy and credit losses minus all operating expenses, excluding debt service.
A property generates $150,000 in NOI and is valued using a 6% capitalization rate. What is the estimated property value?
Answer: $2,500,000
Value equals NOI divided by cap rate: $150,000 ÷ 0.06 = $2,500,000.
Which valuation approach is most appropriate for income-producing multifamily residential properties?
Answer: Income approach
The income approach is primary for income-producing properties because it directly reflects the property's ability to generate revenue.
The Gross Rent Multiplier (GRM) is calculated by dividing:
Answer: Property sale price by annual gross rental income
GRM = Sale Price ÷ Annual Gross Rental Income, providing a quick comparison metric across similar properties.
Which factor would most directly cause capitalization rates to INCREASE in a market?
Answer: Rising interest rates and increasing economic uncertainty
Rising interest rates increase borrowing costs and investor return requirements, pushing cap rates higher and values lower.
When comparing rental comps, a positive adjustment is made to a comparable property when the comparable:
Answer: Lacks a feature that the subject property has
When a comp lacks something the subject has, you adjust the comp upward to reflect what it would have rented for if it had that feature.
In the income approach, 'Effective Gross Income' (EGI) is best defined as:
Answer: Gross Potential Income minus vacancy losses and credit losses
EGI = Gross Potential Income minus vacancy loss and credit loss, representing realistic collectible income.