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
In a 'highest and best use' analysis for a multifamily property, which of the four tests is evaluated LAST?
Answer: Maximally productive
Maximally productive — which use generates the highest value — is determined only after confirming a use is legally permissible, physically possible, and financially feasible.
The 'band of investment' technique for developing a capitalization rate accounts for:
Answer: Both debt and equity return requirements weighted by their proportions in the capital stack
The band of investment blends the mortgage constant (debt component) and equity dividend rate weighted by LTV and equity ratio to derive an overall cap rate.
A property's 'economic occupancy' is most accurately defined as:
Answer: Actual rent collected divided by the gross potential rent at 100% occupancy
Economic occupancy measures revenue efficiency — how much of maximum potential rent is actually being collected — rather than simple physical counts.
When a lender requires a Debt Service Coverage Ratio (DSCR) of 1.25 on an apartment loan, this means:
Answer: NOI must be at least 25% greater than the annual debt service payment
DSCR of 1.25 means NOI ÷ Annual Debt Service = 1.25, so NOI must exceed debt service by 25% as a lender safety buffer.
Why is 'submarket' analysis critical in apartment leasing and valuation?
Answer: Rents, vacancy, and demand can vary dramatically within a single metropolitan area
Conditions within submarkets — urban core vs. suburban vs. transitional — can diverge sharply even when metro-wide averages appear stable.
Which statement correctly describes the relationship between capitalization rates and property values when NOI remains constant?
Answer: Lower cap rates produce higher property values
Value = NOI ÷ Cap Rate; when NOI is fixed, a lower cap rate means dividing by a smaller number, yielding a higher value.
When completing a rent comparability study, which property characteristic most directly requires a dollar adjustment to rental comps?
Answer: Differences in unit square footage between the subject and comparable properties
Unit size directly affects the value a resident receives; appraisers and analysts typically calculate a per-square-foot rent to isolate and adjust for size differences.