Which is a variable expense in an apartment operating statement?
Correct Answer
C) Utilities paid by the landlord
Why this is correct: Variable expenses change with occupancy or usage. Utilities paid by the landlord fluctuate based on tenant consumption and occupancy levels. Why the other choices are wrong: "Property insurance premiums" are fixed expenses, typically constant regardless of occupancy. "Real estate taxes on the property" are fixed by the taxing authority. "Mortgage interest on the loan" is a financing cost, not an operating expense for NOI calculation. Exam tip: Remember that NOI excludes financing costs; variable expenses change with occupancy, fixed expenses do not.
Why This Is the Correct Answer
Why this is correct: Variable expenses change with occupancy or usage. Utilities paid by the landlord fluctuate based on tenant consumption and occupancy levels. Why the other choices are wrong: "Property insurance premiums" are fixed expenses, typically constant regardless of occupancy. "Real estate taxes on the property" are fixed by the taxing authority. "Mortgage interest on the loan" is a financing cost, not an operating expense for NOI calculation. Exam tip: Remember that NOI excludes financing costs; variable expenses change with occupancy, fixed expenses do not.
More Income Approach Questions
In a percentage lease, rent is commonly structured as:
In a DCF, what is the reversion?
Potential gross income differs from effective gross income in that PGI assumes:
The reversion in a discounted cash flow model represents:
Building A (new, credit tenant, 20-year lease) and Building B (older, month-to-month tenants) sell the same week. Their cap rates should differ how?
An overall rate extracted from a sale whose NOI excluded reserves, applied to a subject NOI that includes them, will:
Replacement reserves cover which kind of expenditure?
What is the primary distinction, for appraisal purposes, between 'vacancy loss' and 'collection loss'?
An appraiser is analyzing a mixed-use property with retail and office components. The retail segment has a potential gross income of $180,000 with a market vacancy of 8%. The office segment has a potential gross income of $120,000 with a market vacancy of 12%. What is the overall effective gross income for the property?
The mortgage constant represents:
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A GRM built from monthly rents cannot be applied to annual rent because:
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A 12-unit apartment building has a potential gross income of $120,000, comprised entirely of market rents. The market vacancy rate is 4%, but the subject's historical vacancy and collection loss over the past three years has averaged 9%. When developing an opinion of market value using the income approach, which vacancy rate should the appraiser use to estimate Effective Gross Income?