Real Estate Investing Real Estate Valuation Methods 2

Question 1

A duplex generates $24,000 in annual gross rents but has $6,000 in vacancies and $8,000 in operating expenses. What is the Net Operating Income (NOI)?

Accepted Answer

$10,000

Answer

$16,000

Answer

$18,000

Answer

$24,000

Question 2

Which capitalization rate scenario indicates a LOWER-risk, more desirable market for buyers?

Accepted Answer

Cap rate of 7%

Answer

Cap rate of 9%

Answer

Cap rate of 11%

Answer

Cap rate of 13%

Question 3

An investor uses the Gross Rent Multiplier (GRM) method. A comparable property sold for $450,000 with annual gross rents of $50,000. What GRM should be applied to a subject property earning $60,000/year?

Accepted Answer

$540,000

Answer

$480,000

Answer

$600,000

Answer

$630,000

Question 4

Under the cost approach, what term describes the loss in value due to a property's functional layout being outdated compared to current market standards?

Accepted Answer

Functional obsolescence

Answer

Physical deterioration

Answer

Economic obsolescence

Answer

External obsolescence

Question 5

When performing a sales comparison approach, an appraiser finds a comparable sold for $300,000 but had a pool worth $15,000 that the subject property lacks. How is the adjustment made?

Accepted Answer

Subtract $15,000 from the comparable's price

Answer

Add $15,000 to the subject's value

Answer

Add $15,000 to the comparable's price

Answer

Subtract $15,000 from the subject's value

Question 6

Which valuation approach is MOST appropriate for a single-family home in a neighborhood with many recent sales?

Accepted Answer

Sales comparison approach

Answer

Income approach

Answer

Cost approach

Answer

Discounted cash flow analysis

Question 7

A property's NOI is $50,000 and it sells at a 5% cap rate. If market cap rates then rise to 6.25%, what happens to the implied value?

Accepted Answer

Value decreases to $800,000

Answer

Value increases to $1,250,000

Answer

Value stays at $1,000,000

Answer

Value decreases to $750,000