FREE Real Estate Investing Investment Property Valuation Questions and Answers

Question 1

An investor is analyzing a small apartment building with a potential gross annual rental income of $120,000.
Similar properties in the market have an average Gross Rent Multiplier (GRM) of 8.
Using the GRM approach, what is the estimated value of the property?

Accepted Answer

$960,000

Answer

$1,440,000

Answer

$1,200,000

Answer

$15,000,000

Question 2

Which of the following items is NOT deducted from Gross Operating Income when calculating a property's Net Operating Income (NOI)?

Accepted Answer

Debt Service (Mortgage Payments)

Answer

Property Management Fees

Answer

Annual Property Taxes

Answer

Maintenance and Repairs

Question 3

An investment property has a Net Operating Income (NOI) of $75,000 and the market capitalization rate for similar properties is 6%. What is the estimated value of the property using the income capitalization approach?

Accepted Answer

$1,250,000

Answer

$450,000

Answer

$800,000

Answer

$1,000,000

Question 4

The Cost Approach to valuation is most suitable for which of the following properties?

Accepted Answer

A newly constructed public library with unique architectural features.

Answer

A 10-year-old, fully-occupied apartment complex in a highly active rental market.

Answer

A historic building with significant deferred maintenance and a complex income stream.

Answer

A single-family home in a subdivision with numerous recent, comparable sales.

Question 5

An appraiser is using the Sales Comparison Approach to value an investment property. The subject property has a two-car garage, but a comparable property that recently sold for $450,000 only has a one-car garage. If the market values a two-car garage at $20,000 and a one-car garage at $10,000, what adjustment should be made to the comparable property's sale price?

Accepted Answer

Add $10,000

Answer

Add $20,000

Answer

Subtract $10,000

Answer

Subtract $20,000

Question 6

A real estate investor is considering a property with a purchase price of $2,000,000. The property's Net Operating Income (NOI) is $120,000. What is the capitalization rate for this investment?

Accepted Answer

6.0%

Answer

5.0%

Answer

8.3%

Answer

16.7%