Real Estate Investing Investment Property Analysis 3

Question 1

An investor uses the 50% rule to quickly estimate operating expenses on a rental. If gross rents are $2,000/month, what does the rule estimate for monthly expenses?

Accepted Answer

$1,000

Answer

The 50% rule assumes operating expenses (excluding mortgage) equal roughly 50% of gross rents, or $1,000 here.

Question 2

Vacancy and credit loss in property analysis represents:

Accepted Answer

Income lost due to empty units or non-paying tenants

Answer

Vacancy and credit loss is subtracted from potential gross income to arrive at effective gross income.

Question 3

What is the primary purpose of a proforma in real estate investment analysis?

Accepted Answer

To project future income, expenses, and returns for a property

Answer

A proforma is a forward-looking financial model used to evaluate a property's expected performance over a holding period.

Question 4

A single-family rental has a purchase price of $250,000 and annual gross rent of $20,000. What is the GRM?

Accepted Answer

12.5

Answer

GRM = $250,000 ÷ $20,000 = 12.5.

Question 5

Which approach to value is most commonly used by appraisers for income-producing properties?

Accepted Answer

Income approach

Answer

The income approach values property based on its income-generating potential using cap rate or discounted cash flow analysis.

Real Estate Investing Practice Test

Real Estate Investing Practice Test

Real Estate Investing Investment Property Analysis 3