Practice of Mortgage Brokerage -
AMBA Exam Questions & Answers
(Grade A+)
Income Capitalization Approach -
correct answer ✅Used to determine the value of a revenue-
generating property; the value of a property is directly related to
the income it will generate.
Highest and Best Use -
correct answer ✅Use that supports the highest value and
produces the greatest net return over a period of time. Has
significant impact on the value of the property.
ROI -
correct answer ✅Return on Investment. If I invest x dollars, how
much will I get back in return? Income generating properties must
have a favourable ROI in order to interest buyers.
Gross Revenue -
correct answer ✅Revenue BEFORE expenses
Net operating income (NOI) -
correct answer ✅Gross Revenue MINUS expenses and overhead
costs is NOI
,Practice of Mortgage Brokerage -
AMBA Exam Questions & Answers
(Grade A+)
Income Approach Valuation - 2 steps -
correct answer ✅1) Determine NOI
2) Determine overall property value by capitalizing NOI
Determine NOI - 3 steps -
correct answer ✅1) find potential gross annual income (rent,
parking income, laundry machine income)
2) deduct allowance for vacancies and bad debts
3) This gives you the Effective Gross Income
4) Take away operating expenses (heat, gas, property tax, etc.)
5) Answer is your NOI (AKA: NOL - Net operating Loss)
Potential Gross Annual Income -
correct answer ✅Revenue estimate based on current market rents
in similar properties. Refers to 100% occupancy situation in a rental
property. Include things like parking rentals and laundry facilities.
Operating expenses in a rental property -
correct answer ✅property taxes, gas and electricity, heat, water,
,Practice of Mortgage Brokerage -
AMBA Exam Questions & Answers
(Grade A+)
maintenance and repair, reserve fund contributions if applicable,
property management fees, property insurance, misc expenses
such as cleaning, supplies, etc.
Vacancies and bad debts -
correct answer ✅allowances that are a percentage of the potential
gross income (vacant suites, other disruptions in income). Based on
long-term vacancy trends in the area.
Find Effective Gross Income -
correct answer ✅Gross Potential income MINUS vacancy
allowance
Find NOI -
correct answer ✅Effective Gross Income (which is your potential
gross income - vacancy allowance)
MINUS
operating expenses
= NOI
, Practice of Mortgage Brokerage -
AMBA Exam Questions & Answers
(Grade A+)
Stabilizing the NOI -
correct answer ✅A vacant building with no income stream is
reviewed by an appraiser by ASSUMING normal occupancy rates
and lease rates. Appraisers never use ZERO NOI.
Determine property value by capitalizing NOI -
correct answer ✅Net Annual Income (I)
DIVIDED BY
Capitalization Rate (R)
= PROPERTY VALUE (V)
How to find capitalization rate -
correct answer ✅Determined using sales data from the same
market.
Net Annual Income (Or income or NOI)
DIVIDED BY
Sales price (or value)
= capitalization rate
AMBA Exam Questions & Answers
(Grade A+)
Income Capitalization Approach -
correct answer ✅Used to determine the value of a revenue-
generating property; the value of a property is directly related to
the income it will generate.
Highest and Best Use -
correct answer ✅Use that supports the highest value and
produces the greatest net return over a period of time. Has
significant impact on the value of the property.
ROI -
correct answer ✅Return on Investment. If I invest x dollars, how
much will I get back in return? Income generating properties must
have a favourable ROI in order to interest buyers.
Gross Revenue -
correct answer ✅Revenue BEFORE expenses
Net operating income (NOI) -
correct answer ✅Gross Revenue MINUS expenses and overhead
costs is NOI
,Practice of Mortgage Brokerage -
AMBA Exam Questions & Answers
(Grade A+)
Income Approach Valuation - 2 steps -
correct answer ✅1) Determine NOI
2) Determine overall property value by capitalizing NOI
Determine NOI - 3 steps -
correct answer ✅1) find potential gross annual income (rent,
parking income, laundry machine income)
2) deduct allowance for vacancies and bad debts
3) This gives you the Effective Gross Income
4) Take away operating expenses (heat, gas, property tax, etc.)
5) Answer is your NOI (AKA: NOL - Net operating Loss)
Potential Gross Annual Income -
correct answer ✅Revenue estimate based on current market rents
in similar properties. Refers to 100% occupancy situation in a rental
property. Include things like parking rentals and laundry facilities.
Operating expenses in a rental property -
correct answer ✅property taxes, gas and electricity, heat, water,
,Practice of Mortgage Brokerage -
AMBA Exam Questions & Answers
(Grade A+)
maintenance and repair, reserve fund contributions if applicable,
property management fees, property insurance, misc expenses
such as cleaning, supplies, etc.
Vacancies and bad debts -
correct answer ✅allowances that are a percentage of the potential
gross income (vacant suites, other disruptions in income). Based on
long-term vacancy trends in the area.
Find Effective Gross Income -
correct answer ✅Gross Potential income MINUS vacancy
allowance
Find NOI -
correct answer ✅Effective Gross Income (which is your potential
gross income - vacancy allowance)
MINUS
operating expenses
= NOI
, Practice of Mortgage Brokerage -
AMBA Exam Questions & Answers
(Grade A+)
Stabilizing the NOI -
correct answer ✅A vacant building with no income stream is
reviewed by an appraiser by ASSUMING normal occupancy rates
and lease rates. Appraisers never use ZERO NOI.
Determine property value by capitalizing NOI -
correct answer ✅Net Annual Income (I)
DIVIDED BY
Capitalization Rate (R)
= PROPERTY VALUE (V)
How to find capitalization rate -
correct answer ✅Determined using sales data from the same
market.
Net Annual Income (Or income or NOI)
DIVIDED BY
Sales price (or value)
= capitalization rate
