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17 Cards in this Set
- Front
- Back
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How are income producing properties appraised? |
Income capitalization approach. G1160.6 |
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What are the problems with using the income capitalization approach for appraisals? |
based on data that can be hard to find such as cap rates and market info like income/expense ratios. G1160.6 |
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PGI: |
potential gross income. Based on full occupancy*full rent+ other misc. income). G1160.6 |
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EGI: |
Effective gross income: Potential gross income - vacancies & credit losses. G1160.6 |
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How do you calculate Potential gross income (PGI)? |
full occupancy*full rent+other income. G1160.6 |
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HOw do you calculate effective gross income (EGI)? |
Pot. gross income - vacancies + credit losses. G1160.6 |
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How do you calculate NOI? |
EGI - total operating expenses (TOE) . G1160.6 |
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CAP rate is: |
Capitalization rate: a risk factor plus cost of capital. G1160.6 |
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"principal substitution" is |
comparison shopping. G1160.6 |
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Principal of contribution means: |
that remodels/upgrades should produce a profit when selling. G1160.6 |
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When is the cost approach used for appraisals? |
For unusual buildings, such as schools and churches. Comparables are rare. G1160.6 |
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Effective age: |
property condition. G1160.6 |
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"Economic life": |
"useable" life expected from a certain type of property. G1160.6 |
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A lender will calculate the "Life" left in a property with this simple calculation: |
Economic life - Economic age. Why loan 30 years on a property with short life expectancy? G1160.6 |
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NOI/ Cap rate= |
estimated property value. G1160.6 |
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Value can be remembered by the acronym D.U.S.T: |
D- Demand U- Utility S- Scarcity T- Transferability |
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Situs: |
latin for location. Location preference is NOT part of value fundamentals! Watch out for tricky test question! G1160.6 |
