CPM Financial Management 3

Question 1

Which of the following is a common method to estimate property value using income?

Accepted Answer

Income capitalization approach

Answer

The income capitalization approach estimates value by dividing NOI by the market cap rate, reflecting a property's income-generating capacity.

Question 2

What is 'loss to lease' in apartment management?

Accepted Answer

The difference between market rent and actual contracted rent on existing leases

Answer

Loss to lease represents the gap when in-place lease rents are below current market rents, reducing potential gross income.

Question 3

Which financial report shows a snapshot of assets, liabilities, and equity at a specific point in time?

Accepted Answer

Balance sheet

Answer

A balance sheet (statement of financial position) captures assets, liabilities, and owner's equity at a single point in time.

Question 4

What is 'straight-line depreciation' used for in property management accounting?

Accepted Answer

Allocating the cost of a capital asset evenly over its useful life

Answer

Straight-line depreciation spreads an asset's cost equally across its IRS-defined useful life (e.g., 27.5 years for residential property).

Question 5

A property has a GPI of $500,000, vacancy loss of $25,000, and other income of $10,000. What is the EGI?

Accepted Answer

$485,000

Answer

EGI = $500,000 − $25,000 + $10,000 = $485,000.

CPM - Certified Property Manager Practice Test