In a model separating base rent from ancillary real-estate receipts, which listed item belongs in the ancillary other-income line?
Correct Answer
C) Collectible parking and laundry receipts from the real estate.
The stipulated ancillary real-estate receipts are an other-income line, while base shop rent belongs in base rent. Direct tenant utility payments to suppliers are not landlord receipts, and refundable security deposits are not current income merely because held. Separately analyze business or personal-property components where present.
Why This Is the Correct Answer
Option C is correct because collectible parking and laundry receipts attributable to the real estate are classic ancillary other income. They are landlord receipts generated by the property but separate from base rent, so they are listed on the other-income line.
Why the Other Options Are Wrong
Option A: The stipulated base rent from a ground-floor shop.
Option A, the stipulated base rent from a ground-floor shop, belongs on the base rent line, not the ancillary other-income line, in a model that separates the two.
Option B: The tenant’s own electricity payment directly to its supplier.
Option B, the tenant's own electricity payment directly to its supplier, is not a landlord receipt at all. Money the tenant pays a utility company does not flow to the owner, so it is not property income.
Option D: A refundable tenant security deposit held for later return.
Option D, a refundable tenant security deposit held for later return, is a liability to be returned to the tenant, not current income. Holding the deposit does not make it earned revenue.
Does the owner keep it?
Other income is money the owner collects and keeps from the real estate beyond base rent, like parking and laundry. If it goes to someone else or must be returned, it is not income.
How to use: Use the keep-it test to sort any receipt into base rent, other income or not income.
Exam Tip
Ask whether the owner collects the money and retains it, and whether it comes from the real estate rather than from base rent.
Common Mistakes to Avoid
- -Counting refundable security deposits as income
- -Including tenant-paid utilities as owner revenue
- -Placing base rent on the other-income line
Concept Deep Dive
Analysis
This question tests what counts as other income in an income model that separates base rent from ancillary receipts. Other income consists of collectible receipts from the real estate beyond base rent, such as parking and laundry. Base rent, payments the landlord never receives, and refundable deposits do not belong on that line.
Background Knowledge
Potential gross income can include other income in addition to rents, such as parking fees, laundry and vending receipts attributable to the real property. Appraisers separate these real-property receipts from business or personal-property income, which is analyzed separately. Only amounts the owner actually receives and keeps are income.
Real-World Application
Reviewing a fourplex's operating statement, an appraiser lists the apartment rents as base rent and adds coin laundry and garage parking receipts as other income. The appraiser excludes tenant-paid electricity and the security deposit balance from income.
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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The subject property has annual PGI of $105,000, with combined vacancy and collection loss of 4% of PGI. Other property expenses total $15,000, plus an annualized leasing-cost allowance of $8,000 that is not included in that total. Market sales indicate a 10% overall rate on income calculated after these same deductions. What is the indicated value?