Real Estate Investing Property Valuation Techniques 2

Question 1

What does the Gross Rent Multiplier (GRM) measure?

Accepted Answer

Purchase price divided by gross annual rent

Answer

Annual NOI divided by purchase price

Answer

Monthly rent multiplied by 12

Answer

Cap rate divided by annual rent

Question 2

In the income approach, which formula correctly calculates property value?

Accepted Answer

Value = NOI ÷ Cap Rate

Answer

Value = NOI × Cap Rate

Answer

Value = Cap Rate ÷ NOI

Answer

Value = NOI + Cap Rate

Question 3

A property generates $60,000 NOI and similar properties sell at a 6% cap rate. What is the estimated value?

Accepted Answer

$1,000,000

Answer

$360,000

Answer

$600,000

Answer

$3,600,000

Question 4

What is 'effective gross income' (EGI) in property valuation?

Accepted Answer

Potential gross income minus vacancy and credit losses

Answer

Net operating income before debt service

Answer

Total rent plus all ancillary income

Answer

Cap rate multiplied by assessed value

Question 5

Which depreciation type in real estate refers to loss in value from factors outside the property boundaries?

Accepted Answer

External obsolescence

Answer

Physical deterioration

Answer

Functional obsolescence

Answer

Accrued depreciation

Question 6

When using the sales comparison approach, what adjustment is made if a comparable sold 12 months ago in a rising market?

Accepted Answer

A positive time adjustment to the comparable

Answer

A negative time adjustment to the comparable

Answer

No adjustment is needed for time

Answer

A downward adjustment to the subject

Question 7

Which method is most commonly used to value special-purpose properties with no comparable sales?

Accepted Answer

Cost approach

Answer

Sales comparison approach

Answer

Gross rent multiplier method

Answer

Discounted cash flow