Real Estate Investing Real Estate Investing Property Valuation Techniques Questions and Answers 2

Question 1

A residential property generates $2,400 per month in rental income. Using a capitalization rate of 8%, what is the estimated property value using the income approach?

Accepted Answer

$360,000

Answer

$300,000

Answer

$288,000

Answer

$400,000

Question 2

Which appraisal method is most appropriate for valuing a newly constructed single-family home in a subdivision with many recent sales?

Accepted Answer

Sales comparison approach

Answer

Income capitalization approach

Answer

Cost approach

Answer

Gross rent multiplier method

Question 3

What does the gross rent multiplier (GRM) represent in property valuation?

Accepted Answer

The ratio of property price to gross annual rental income

Answer

The ratio of net operating income to property price

Answer

The ratio of operating expenses to gross income

Answer

The ratio of debt service to net income

Question 4

In the cost approach to valuation, which type of depreciation accounts for losses in value due to factors outside the property boundaries?

Accepted Answer

External obsolescence

Answer

Functional obsolescence

Answer

Physical deterioration

Answer

Curable depreciation

Question 5

An investor is analyzing two comparable properties but one has a swimming pool valued at $25,000 that the subject property lacks. How should this be handled in the sales comparison approach?

Accepted Answer

Subtract $25,000 from the comparable's sale price

Answer

Add $25,000 to the comparable's sale price

Answer

Add $25,000 to the subject property's value

Answer

Ignore the difference as immaterial

Question 6

Which factor would most likely cause functional obsolescence in a commercial property?

Accepted Answer

An outdated floor plan that cannot accommodate modern office layouts

Answer

Cracking in the foundation due to settling

Answer

A new highway ramp creating excessive noise nearby

Answer

Normal wear and tear on the roof over 20 years

A residential property generates $2,400 per month in rental income.Using a capitalization rate of 8%, what is the estimated property value using the income approach?

A residential property generates $2,400 per month in rental income.
Using a capitalization rate of 8%, what is the estimated property value using the income approach?