REAL 5080 TEST #1 QUESTIONS & VERIFIED
ANSWERS
The three approaches to value used by real estate appraisers are the: - Answers -
income, cost, and sales comparison approaches
the basic equation used in direct capitalization is - Answers - income/rate=value
Which of the following is not a step in the cost approach? - Answers - Estimate the
future cash flows of the property
Which of the following ARE steps in the cost approach? - Answers - -Estimate the value
of the land
-Estimate the costs of the improvements as if new
-Estimate the accrued depreciation
Assumptions about the buyer and seller used in determining market values are -
Answers - -independence of the parties
-neither is acting from undue duress
Normally one would expect what relationship between going-in and going-out cap rate?
- Answers - the going-out cap rate should be at least as high as the going-in cap rate,
especially if little capital improvement expenditures have been projected (older building
have less growth and more risk)
Which type of lease stipulates that the lessor (landlord) pays all operating expenses of
the real estate? - Answers - Gross rental lease
What legal interest in real estate is valued by adding the present worth of the contract
rent and the present worth of the reversion at the end of the lease? - Answers - the
leased fee estate
The actual rent paid by the tenant is referred to as the - Answers - contract rent
During the recent financial crisis, real estate was considered more risky and rent
projections (rental growth) were lowered. This implies that the overall cap rate on the
properties would be expected to ____________ over this time period - Answers -
increase
______ are alterations to a building that materially prolong its life and increase its value
- Answers - Reserves for replacement
Net Operating income measures the - Answers - cash available to distribute to all the
investors
ANSWERS
The three approaches to value used by real estate appraisers are the: - Answers -
income, cost, and sales comparison approaches
the basic equation used in direct capitalization is - Answers - income/rate=value
Which of the following is not a step in the cost approach? - Answers - Estimate the
future cash flows of the property
Which of the following ARE steps in the cost approach? - Answers - -Estimate the value
of the land
-Estimate the costs of the improvements as if new
-Estimate the accrued depreciation
Assumptions about the buyer and seller used in determining market values are -
Answers - -independence of the parties
-neither is acting from undue duress
Normally one would expect what relationship between going-in and going-out cap rate?
- Answers - the going-out cap rate should be at least as high as the going-in cap rate,
especially if little capital improvement expenditures have been projected (older building
have less growth and more risk)
Which type of lease stipulates that the lessor (landlord) pays all operating expenses of
the real estate? - Answers - Gross rental lease
What legal interest in real estate is valued by adding the present worth of the contract
rent and the present worth of the reversion at the end of the lease? - Answers - the
leased fee estate
The actual rent paid by the tenant is referred to as the - Answers - contract rent
During the recent financial crisis, real estate was considered more risky and rent
projections (rental growth) were lowered. This implies that the overall cap rate on the
properties would be expected to ____________ over this time period - Answers -
increase
______ are alterations to a building that materially prolong its life and increase its value
- Answers - Reserves for replacement
Net Operating income measures the - Answers - cash available to distribute to all the
investors
