Market data indicate a stabilized combined vacancy and collection loss of 6% for a property. Its current vacancy is 2%. Which applies in a stabilized income analysis?
Correct Answer
A) The 6% combined allowance indicated by market data.
Market data support 6% as the stabilized allowance for this property. Today’s occupancy is a point-in-time observation and does not replace that forecast. Do not mechanically average or assume zero loss from tenants presently paying. Subject-specific evidence may justify a different allowance in another case.
Why This Is the Correct Answer
Market data support 6% as the stabilized allowance for this property. Today’s occupancy is a point-in-time observation and does not replace that forecast. Do not mechanically average or assume zero loss from tenants presently paying. Subject-specific evidence may justify a different allowance in another case.
More Income Approach Questions
Which model describes yield capitalization of property benefits?
An appraiser is valuing a duplex. A market survey of recent duplex sales reports prices at 10.8 times potential gross income, with stabilized vacancy and credit loss of 10% of PGI and no other income. The subject's rent schedule is unavailable, but the property manager's records show collected income of $54,000 a year, in line with market rent and the 10% market loss. What value is indicated?
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Previous Question
An appraiser is verifying the sale of a fourplex. The buyer paid the seller $600,000 in cash, using a $450,000 market-rate bank loan and $150,000 of equity. Stabilized annual NOI is $42,000, annual debt service is $30,000 and annual pre-tax cash flow to equity is $12,000. What overall capitalization rate does this sale indicate?
Next Question
An appraiser reconstructing an operating statement reports net operating income (NOI) after a roof-replacement allowance and before financing. Which item is excluded from the deductions used to reach NOI?