Income Approach

Which model describes yield capitalization of property benefits?

A property sold at a cash-equivalent price of $1,062,500. Its stabilized annual NOI is $85,000. What is the indicated overall rate?

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?

A cash-equivalent sale price is $1,500,000 and annual gross income is $125,000. What annual multiplier is price ÷ annual income?

An appraiser is verifying the sale of an apartment building. The stated price of $1,600,000 consisted of $600,000 in cash and a $1,000,000 seller note at a below-market interest rate. The market value of the note is 96.25% of its face amount. The seller paid a $50,000 brokerage commission. Stabilized annual NOI is $125,000. What overall rate does this sale indicate?

A single $100,000 payment is received at the end of year 5. Using annual compounding at a 7% discount rate, what is its present value, rounded to the nearest dollar?

A supported price-to-income multiplier of 120 is explicitly defined on the same period and income basis as the subject’s $3,500 income. With no further adjustments, what value is indicated by multiplying the two?

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 for the subject is $150,000, with combined vacancy and collection loss of 7% of PGI and no other income. Operating expenses, excluding debt service, are 35% of EGI. Using a 9.5% overall rate, what is the indicated value, rounded to the nearest dollar?

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?

Annual potential gross rent for the subject property is $120,000, and combined vacancy and collection loss is 5% of rent. There is no other income. All annual property expenses, including real estate taxes and reserves but excluding debt service, total $38,000. Using an overall rate of 9%, what is the indicated value, rounded to the nearest dollar?

The subject property's potential gross rent is $120,000 per year, with combined vacancy and collection loss of 8% of rent and no other income. All annual property expenses, including real estate taxes and reserves but excluding debt service, total $35,000. The overall rate is 9.5%. What is the indicated value, rounded to the nearest dollar?

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?

The subject property has annual potential gross rental income of $150,000, vacancy and collection loss of 5% of that income and no other income. Sales of similar properties indicate an effective gross income multiplier of 8.5. What value is indicated?

Annual potential rental income for the subject is $200,000. Vacancy and collection loss is 8% of that amount, and there is no other income. Annual operating expenses of $65,000 include property taxes and the same reserve allowance used to extract the 9% overall rate; they exclude debt service. What value is indicated by direct capitalization, rounded to the nearest dollar?

Annual potential rental income is $600,000 and vacancy loss alone is $36,000. What percentage of potential rent does that loss represent?

Recent market data for competing properties show vacancy rates of 8%, 12% and 6%. An appraiser uses the simple mean of these rates, with no further weighting, for a property with annual PGI of $240,000. There is no collection loss or other income. What is the annual EGI?

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?

A lender will fund 70% of value at an annual mortgage constant of 8%. The remaining equity requires an annual equity dividend rate of 12%. Annual NOI is $92,000. Using the band of investment to develop the overall rate, what value is indicated, rounded to the nearest dollar?

Annual NOI for the subject is $85,800. Typical financing covers 70% of value at an annual mortgage constant of 6%, and the remaining equity has a current annual dividend rate of 12%. Using the band of investment to develop the overall rate, what value is indicated, rounded to the nearest dollar?

Sales of similar small apartment buildings indicate an overall rate of 6.7%. Lenders are quoting a 5.5% annual mortgage constant, and investors in these properties expect a 9.5% equity dividend rate. What loan-to-value ratio is consistent with these rates under the band of investment?

A property has annual NOI of $82,800. Debt funds 70% of value at an annual mortgage constant of 8%, and the remaining equity has a current annual dividend rate of 12%. What value is indicated using an overall rate from the band of investment, rounded to the nearest dollar?

The subject property is an office building with stabilized NOI of $123,000. Typical financing for similar properties is a 75% loan-to-value loan at 6.5% interest with a 7.6% annual mortgage constant. Equity investors expect a 10% equity dividend rate. At the value indicated by the band of investment, what is the annual pre-tax cash flow to equity?

End-of-year 1 cash flow is $80,000 and end-of-year 2 cash flow including all terminal proceeds is $1,080,000. No other cash flows apply. At an 8% annual discount rate, what present value results?

An income stream consists of ten $10,000 year-end receipts, discounted at an 8% annual rate. The present value of an annuity factor is approximately 6.710. What is the present value?

The subject property has annual contract potential rent of $110,000, less a $10,000 free-rent concession. Combined vacancy and collection loss is 4% of the rent remaining after the concession, and annual property expenses total $16,000. The concession is not included in any other deduction. At a 10% overall rate, what is the indicated value?

An appraiser is valuing a property with annual NOI of $120,000. The mortgage interest has a known value of $800,000 and a 7.5% annual mortgage constant, and the current dividend rate on equity is 12%. Using the equity residual technique, what is the total property value?

The mortgage interest in a property is valued at $1,050,000, and annual debt service is $96,000. Annual NOI is $142,000. The equity dividend rate is 10%. Using the equity residual technique, what is the total property value?

Initial equity is $250,000 and annual before-tax cash flow to equity is $75,000. What current cash dividend rate results?

Initial equity is $50,000, and annual before-tax cash flow to that equity is $8,000. What current cash-on-cash dividend rate results?

One $150,000 receipt occurs at the end of year 5, with no other cash flows. At an annually compounded 8% discount rate, what is its present value, rounded to the nearest dollar?

One $800,000 receipt occurs at the end of year 10, with no other cash flows. At an annually compounded 9% discount rate, what is its present value, rounded to the nearest dollar?

Ten fixed payments of $50,000 are received at each year-end. No terminal or other cash flow exists. At an 8% annual discount rate, what present value results, rounded to the nearest dollar?

While verifying a fourplex sale, an appraiser learns that the buyer paid $900,000 cash equivalent. Potential gross income over the prior year was $100,000, but an above-market lease on one unit was ending, and the buyer projected potential gross income of $90,000 less a 5% vacancy allowance. The subject fourplex has market potential gross income of $110,000. What value does a potential gross income multiplier from this sale indicate?

The subject property produces annual gross income of $96,000. A price-to-income multiplier of 8.5 from comparable sales is also based on annual gross income. What value does it indicate?

An appraiser is valuing a rental house with a monthly gross rent of $2,400. Rented sales in the market area indicate a gross rent multiplier of 120, based on monthly gross rent. What is the indicated value?

Total initial equity is $100,000, and annual before-tax cash flow to that equity is $8,000. What current equity dividend rate results?

An appraiser is comparing two recent sales of similar fourplexes, each with level rent throughout the year. One data service reports Sale 1 at 11.2 times annual gross rent, and another reports Sale 2 at 129 times monthly gross rent. Which sale has the higher multiplier?

A property has two lawful and feasible uses. Annual net operating income (NOI) attributable to the real estate is $180,000 in the current use and $220,000 in the alternative use. The capitalization rate for both uses is 10%. Converting to the alternative would happen immediately at a total cost of $300,000, with no delays or other costs. What is the net indicated value of the alternative use after conversion costs?

Use a stated property value of $1,000,000 and loan amount of $800,000. What is loan ÷ stated value as a percentage?

A property could lawfully and feasibly stay in its current use, with annual net operating income (NOI) of $75,000, or convert to an alternative use with annual NOI of $85,000. The capitalization rate for each use is 8%. Conversion would be immediate at a total cost of $200,000, with no delays or other costs. What is the higher net indicated value of the two uses?

A supported price-to-income multiplier of 18 is explicitly defined on the same period and income basis as the subject’s $96,000 annual income. With no further adjustments, what value is indicated by multiplying the two?

A property produces annual NOI of $160,000. The equity interest has a known value of $500,000 and a 12% current dividend rate, and the annual mortgage constant is 8%. Using the mortgage residual technique, what is the total property value?

Which process best supports a forward stabilized loss estimate?

Annual operating expenses are $165,000, excluding debt service. Annual effective gross income is $500,000. Using EGI as the denominator, what operating expense ratio results?

An enforceable below-market lease expires in five years, with no renewal rights; supported market rent is higher. How should that expected transition affect today's leased-fee model?

An appraiser estimates stabilized annual NOI of $180,000 and an overall capitalization rate of 8% for the subject property. What is the indicated value, rounded to the nearest dollar?