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79 Cards in this Set
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- Back
- 3rd side (hint)
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You own an apartment house. The potential annual gross income is $40,000. It has a 5%"vacancy rate. The annual operating expenses are $10,000. What is the net operating income? |
28,000 5% of 40,000 (.05 X 40,000)= 2,000 10,000 + 2,000=12,000 40,000 - 12,000= 28,000 |
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A few years ago you bought a property got $100,000. You put $10,000 into improvements and claimed $6,000 in depreciation. You sell the property for $120,000. What is the capital gain? |
16,000 1) 10,000 - 6,000= 4,000 2) 100,000 + 4,000= 104,000 3) 120,000 - 104,000 |
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Harry found a 2 story shop in Old Towne that is just perfect for his Magic Shop except for the carpet. The building measures 30'X60'. Calculate the cost of carpeting at $15.99 /sq. Yrd. |
639 30X60= 180 sq ft 180 sq ft X 2 (2 story)= 360 *2 story, multiply by 2, then divide by 9* 360÷9=40 40 x 15.99 |
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Depreciation |
Loss of value for any reason |
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The first step in conducting an appraisal |
Define the purpose for the appraisal |
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Real property |
All the interest, benefits, rights and encumbrances inherent in the ownership of physical real estate |
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Ad Valorem |
Appraisers that are charged with the responsibility for the discovery, listing, and valuation of all taxable property in their jurisdictions. Make every effort to ensure that each property is assessed uniformly with regard to value, in order to determin an individuals fair share of the property |
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The assessor |
Establishes the market value of the property |
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Michigans assessment ratio: |
%50 |
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The rate of taxationc is expressed in: |
Mills |
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Each Mill is: |
1/10th of a cent One mill is written. 001 43 mills is written .043 |
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Taxes are in: |
Mills |
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The assessed value of the property is $96,500. Hometown, Michigan charges 32 mills. What are the annual property taxes? |
3,088 Assessed value 96,500 X .032 = 3,088 |
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Pleasant valley has a 105% equalization factor. The rate of taxation is 32 mills and the property has an assessed value of 60,000. What are the annual property taxes? |
$2,016 Assessed value 60,000 X 105% = 63,000 63,000 X 32 mills (.032) = 2,016 |
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The market value of this property in Georgia is $70,000. The assessment ratio is 40%. The taxes are $924. What is the milleage? |
33 70,000 X 40% = 28,000 924 ÷ 28,000 = .033; 33 |
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This michigan property owner is paying $2,625 in property taxes. The rate is 42 mills. What is the market value? |
125,000 2,625 ÷ .042= 62,500 62,500 X 2= 125,000 Assessed value is one half of the market value/price |
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Lindas property is valued at $180,000. It is located in michigan where the assessment ration is 50%. The tax rate is 42 mills. What are her taxes? |
3,780 180,000 X .50= 90,000 90,000 X .042= 3,780 |
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How many levels of license appraisers in michigan? |
4 Limited real estate appraiser State licensed real estate appraiser Certified residential appraiser Certified general appraiser |
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Principals of appraising |
Conformity Contribution Substitution Plottage Useful Life |
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Conformity |
Value is created and sustained when the real estate characteristics are similar |
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Contribution |
The value an item adds to the property. May not be as much as the cost of the item |
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Substitution |
The economic principles that state a buyer will try to pay as little as possible for the property that meets the buyers needs. |
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Plottage |
The whole is worth MORE THAN the sum of its parts |
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Useful Life |
The amount of time a property can be used. May also be referred to as its remaining economic life |
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Remaining economic life |
The amount of time a property can be expected to remain useful |
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Market Comparison Approach Comparison Approach |
The appraiser determines value by comparing the property being appraised, against properties that have recently sold in the area and are similar in size, age, construction and amenities |
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Comparative market analysis, direct sales approach, or market data approach are also called: |
Market Comparison Approach |
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The goal of the Sales Comparison Approach |
To determine market value. Establishes market value under the premise that a buyer will not pay more for a property than a cost to purchase another similar property in the area |
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You cannot adjust the: |
Subject |
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Comparable properties are always adjusted: |
Up or down to make it as similar to the subject property as possible |
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The approach in which one values the land separately as though it were vacant is: |
The market comparison approach |
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Loss in value due to operational inadequacies, poor design, or changing tastes is referred to as: |
Functional obsolescence |
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There are how many types of cost approach? |
2 Replacement Reproduction |
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Replacement |
The appraiser determines the cost to replace the building using todays prices of material and labor with something of similiar utility |
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Reproduction |
The appraiser estimates the cost to reproduce the improvements, exactly the way they were first constructed. Exact duplicate |
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Capitalization Approach |
Method used when valuing businesses or income producing properties |
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As the cap rate goes up, what goes down? |
Value |
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You are helping a buyer locate a bakery. Your buyer insists upon an investment that will bring a 9% capitalization rate. The business he is considering netted $54,990 last year. How much would the buyer be willing to pay? |
611,000 54,990 ÷ .09= 611,000 |
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The automotive store you are listing grossed $912,300 and had $800,700 in deductible expenses. A typical automotive store in your aread has a 6% capitalization rate. What is the value of the store? |
1,860,000 912,300 - 800,700= 111,600 111,600 ÷ .06= 1,860,000 |
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Gross rent multipliers (GRM) are used: |
To value rental properties. |
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How many factors which devalue properties? |
3 Physical deterioration Functional obsolescence External obsolescence |
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Physical deterioration |
The result of wear and tear. Mostly curable. Also the result of deferred maintenance. |
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Functional Obsolescence |
Outmoded designs or unacceptable design |
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External Obsolescence |
Result of factors outside the lot lines. Considered least curable |
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Curability is strictly: |
Cost |
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The final step in an appraisal |
When they reconcile their data |
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Interest |
You may only deduct interest on your FIRST and SECOND homes. |
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Tully ownes 5 homes. He calls michigan his home. He has a winter place in florida, and 3 other places. He has mortgages and property taxes on all of them. What may he deduct on his federal income tax return? |
His first and second properties |
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Property taxes |
Onlu actual ad valorum taxes are deductible, not special assessments. |
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Points |
May deduct them in the year paid as though they were interest. |
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Points to refinance are: |
Not deductible |
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Prepayment penalty |
Deduct as though it were interest. Also called a mortgage prepayment privilege |
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Casualty losses |
Must be adjusted by a certain percent of your adjusted gross income. Must be losses that are NOT COVERED by insurance |
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Straight line depreciation equals: |
Basis ÷ Useful life |
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Income tax benefits/real property deductibles include: |
Interest Property taxes Points Prepayment penalty Casualty losses Office in home |
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Non deductible real property items: |
Home repairs Capital improvements |
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Home repairs |
Expenses that simply repair an existinf part of the home. Does not add to the basis |
Wasted money |
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Capital improvements |
Anything that adds to the value, converts it to a new use or extends its usefull life. Will add to the basis |
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Basis |
The starting point |
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The method of acquiring the property can determine: |
The basis |
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Purchase |
What you paid for the property. |
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Construction |
What you spend to build |
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Exchange |
Basis in the replacement property is the same as your basis in the relinquished property |
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Inheritance |
Getting a stepped up basis. Basis becomes fair market value on the date of the decedent's death |
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Gift |
Basis is not stepped up. Basis is lesser of the donors basis or fair market value on the date of the gift |
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How many types of gain? |
2 Recognized Realized |
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Realized Gain |
Any profit an individual realizes |
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Recognized Gain |
That upon which one must pay capital gain principal residence for at least 2 of the past 5 years |
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1 lineal yard equals |
3 lineal feet |
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1 cubic yard equals |
27 cubic feet |
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Area equals |
L X W |
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Square feet ÷ 9 equals |
Square yards |
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A 30' X 30' bulding has how many square feet? |
900 |
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Cubic feet ÷ 27 equals |
Cubic yards |
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Volume is calculated by |
Length X width X depth |
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You need to pour a new sidewalk that is 4' wide, 16' long, and 4" thick. Concrete costs 70.00/ cubic yard. 1. How many cubic yards of Concrete are required? 2. How much will the Concrete cost? |
1 cubic yrd= 27 cubic feet 4" = (4/12) 1/3 foot 4 ft X 16 ft X 1/3=21.3 cubic ft 21.3 ÷ 27 cubic feet=.79 cubic yards .79 cubic yards X $70.00= $55 |
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Prospectively |
Here forward |
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Retrospectively |
Backwards |
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Prorate the taxes for a closing on October 1st, in which the taxes are not yet due. The tax bill will be $1,200 and due at the end of the year |
$276 due October, November, December = 92 days 1200 due annually ÷ 365 days in a year= $3.00/day 92 days ÷ $3/day= 276 due |
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