SAEE Income Approach and Capitalization

Question 1

Which income approach method estimates value by dividing a single year's net operating income by an overall capitalization rate?

Accepted Answer

Direct capitalization

Answer

Yield capitalization

Answer

Discounted cash flow

Answer

Gross rent multiplier

Question 2

What is net operating income (NOI) in real property appraisal?

Accepted Answer

Potential gross income minus vacancy and operating expenses

Answer

Effective gross income minus vacancy allowance only

Answer

Total rental income before any deductions

Answer

Effective gross income minus debt service

Question 3

A property generates $80,000 NOI and comparable sales indicate an overall cap rate of 8%. What is the indicated value?

Accepted Answer

$1,000,000

Answer

$800,000

Answer

$640,000

Answer

$1,200,000

Question 4

Which of the following is NOT typically included as an operating expense in an income approach analysis?

Accepted Answer

Mortgage debt service

Answer

Property taxes

Answer

Insurance premiums

Answer

Management fees

Question 5

In yield capitalization, the discount rate used reflects the:

Accepted Answer

Total required return on the investment including risk

Answer

Current mortgage interest rate only

Answer

Local property tax rate

Answer

Depreciation rate of improvements

Question 6

The gross rent multiplier (GRM) is calculated by dividing:

Accepted Answer

Sale price by gross annual rental income

Answer

NOI by effective gross income

Answer

Sale price by net operating income

Answer

Effective gross income by operating expenses