When reconciling historical and competitor vacancy evidence for an explicitly stabilized income model, what should primarily guide the selected vacancy rate?
Correct Answer
D) the rate that reflects typical, long-term expectations for the market.
For the stated stabilized model, reconcile evidence of typical expectations appropriate to the subject and market. Historical and competing-property data are relevant and neither automatically controls. An area-wide average or an equal mean is not a substitute for explaining a supported forecast.
Why This Is the Correct Answer
For the stated stabilized model, reconcile evidence of typical expectations appropriate to the subject and market. Historical and competing-property data are relevant and neither automatically controls. An area-wide average or an equal mean is not a substitute for explaining a supported forecast.
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?
The subject property is a fourplex with annual EGI of $72,000 and operating expenses of $28,800. Of those expenses, $18,000 is fixed and $10,800 varies in direct proportion to EGI. The owner's annual mortgage payments are $21,000. An appraiser projects that EGI will fall 10% because of higher vacancy. What is the projected NOI?
Annual NOI available for debt service is $168,000 and total annual mortgage principal and interest debt service is $120,000. What is NOI ÷ debt service?
Annual PGI is $250,000 and combined vacancy and collection loss is explicitly 12% of that same PGI base. There is no other income. What annual EGI remains?
Annual PGI is $360,000 and combined vacancy and collection loss is explicitly 8% of that same PGI base. There is no other income. What annual EGI remains?
Annual PGI is $640,000. Combined vacancy and collection loss is 6.25% of PGI. There is no other income. What EGI remains?
An appraiser is updating a prior appraisal of a triplex with potential gross income of $60,000 and no other income. The prior appraisal used vacancy and credit loss of 5% of PGI, and a new survey of competing rentals indicates 8%. The operating expenses of $24,000 are property taxes, insurance and contract services that do not vary with occupancy, and the market overall rate remains 7.5%. By what percentages do effective gross income and indicated value decrease?
Annual potential rental income is $600,000 and vacancy loss alone is $36,000. What percentage of potential rent does that loss represent?
In the subject's market, lenders on fourplexes have lowered their typical loan-to-value ratio from 70% to 60%. The annual mortgage constant remains 5% and the equity dividend rate remains 10%. The subject's NOI has not changed. How does this affect the overall rate indicated by the band of investment and the indicated value?
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Previous Question
Extracting an overall rate from a comparable sale requires that the comparable's NOI be:
Next Question
An appraiser is verifying the sale of a furnished 16-unit apartment building recorded at $2,000,000. The price includes furniture worth $40,000. The seller carried a below-market loan, and the appraiser estimates that this financing added $85,000 to the price. NOI from the real property is $150,000. What overall rate should the appraiser extract from this sale?