FHA Financial Analysis & Planning 4

Question 1

An FHA appraiser is asked to value a four-unit property using the income approach. The annual debt service is $24,000 and the DCR is 1.25. What is the property's NOI?

Accepted Answer

$30,000

Answer

NOI = DCR × Annual Debt Service = 1.25 × $24,000 = $30,000.

Question 2

Under FHA appraisal standards, what is the primary purpose of a reserve for replacement allowance in income property analysis?

Accepted Answer

To account for future capital expenditures on short-lived components

Answer

Reserves for replacement set aside funds annually to replace short-lived components (HVAC, roof, appliances) over their useful lives.

Question 3

Which of the following best describes the 'break-even ratio' used in income property financial analysis?

Accepted Answer

The occupancy rate at which operating expenses and debt service equal gross income

Answer

BER = (Operating Expenses + Debt Service) ÷ Potential Gross Income; it shows the occupancy needed just to break even.

Question 4

A triplex generates a PGI of $54,000, a 7% vacancy rate, $3,000 in other income, and $18,500 in operating expenses. What is the NOI?

Accepted Answer

$34,720

Answer

EGI = ($54,000 × 0.93) + $3,000 = $53,220; NOI = $53,220 − $18,500 = $34,720.

Question 5

In FHA appraisal, which term describes the process of converting a single year's income estimate into a value indication?

Accepted Answer

Direct capitalization

Answer

Direct capitalization converts a single stabilized year's NOI into value by dividing by the cap rate (V = NOI ÷ R).

(FHA) Federal Housing Administration Appraiser Certification Practice Test

(FHA) Federal Housing Administration Appraiser Certification Practice Test

FHA Financial Analysis & Planning 4