Income Approach and Capitalization Flashcards
6 cards from real SAEE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Income Approach and Capitalization flashcards as text
Effective gross income (EGI) is best defined as:
Answer: Potential gross income minus vacancy and collection loss
EGI = Potential Gross Income − Vacancy and Collection Loss, representing anticipated actual income from the property.
Which technique divides value into land and building components and capitalizes each at a different rate?
Answer: Land residual technique
The land residual technique attributes known building value, calculates building income, and capitalizes remaining income attributable to land.
A capitalization rate derived from comparable sales is called a(n):
Answer: Overall rate (OAR)
The overall capitalization rate (OAR) is extracted from market sales by dividing NOI by sale price of comparable properties.
In discounted cash flow analysis, what does the terminal value represent?
Answer: The projected resale price at the end of the holding period
The terminal (reversion) value is the anticipated resale proceeds at the end of the investment holding period.
The band-of-investment technique derives a cap rate by weighting:
Answer: Mortgage and equity components by their proportions of total value
Band-of-investment creates a composite cap rate by weighting the mortgage constant and equity dividend rate by their respective loan-to-value and equity ratios.
Vacancy and collection loss is typically expressed as a percentage of:
Answer: Potential gross income
Vacancy and collection loss is expressed as a percentage of potential gross income to estimate the income lost to unleased space and uncollected rent.