Financial Analysis & Planning Flashcards

An FHA appraiser is analyzing a property with a gross monthly rent of $2,400. Using the Gross Rent Multiplier (GRM) method and a market GRM of 140, what is the indicated value?

Answer: $336,000

GRM × Monthly Rent = Value; 140 × $2,400 = $336,000.

When calculating Net Operating Income (NOI) for an FHA appraisal, which of the following is NOT deducted from Effective Gross Income?

Answer: Mortgage debt service

Mortgage debt service is a financing expense deducted below NOI, not from EGI to arrive at NOI.

A property has a potential gross income of $60,000, a vacancy and collection loss of 8%, and operating expenses of $22,000. What is the NOI?

Answer: $33,200

EGI = $60,000 × 0.92 = $55,200; NOI = $55,200 − $22,000 = $33,200.

In FHA appraisal for income properties, the overall capitalization rate is best described as:

Answer: The ratio of NOI to property value

The overall cap rate (OAR) equals NOI divided by property value and reflects the entire property's income return.

Which FHA guideline addresses the requirement that an appraiser must analyze the subject property's income potential relative to its market area when appraising a two- to four-unit property?

Answer: HUD Handbook 4000.1

HUD Handbook 4000.1 governs FHA single-family appraisal requirements including income analysis for small income properties.

A property generates an NOI of $28,500 annually. If the market capitalization rate is 6.5%, what is the indicated value using direct capitalization?

Answer: $438,462

Value = NOI ÷ Cap Rate = $28,500 ÷ 0.065 = $438,462.

When developing a cash flow forecast for an FHA-insured multifamily property, which projection period is most commonly used in discounted cash flow analysis?

Answer: 10 years

A 10-year holding period is the most common standard for DCF analysis in income-property appraisal.