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REE 4103 Exam 2|Questions with Correct Answers| Verified
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REE 4103 Exam 2|Questions with CorrectAnswers| Verified
A lease on a 8,000 square foot industrial building, where the rent is specified as $3,500/month,
for a 5-year term with level income throughout the lease term. When the lease was negotiated,
the tenant received free rent for the first month of each year as a concession. What is the
effective rent per square foot per year? - ANSWER 3,500 * 11 months = 38,500/yr 38,500 /
8,000 sq ft. = 4.8
At the time of an appraisal a warehouse is leased to a quality tenant for $9.00/square foot.
The rent obtainable in the market at the same time is $6.00/square foot. The lease with the
landlord is termed a: - ANSWER negative leasehold
Rent pursuant to a lease that is paid over and above the guaranteed minimum based on gross
sales of a retail tenant is called: - ANSWER overage rent (excess)
The level of sales at which the percentage rent in a lease exactly equals the base rent is called
the? - ANSWER natural breakpoint
The level of sales at which the percentage clause in a lease is activated is called the? - ANSWER
breakpoint
The amount of net operating income that remains after debt service is paid is called: - ANSWER
equity dividend
The lump-sum benefit an investor receives upon termination of an investment is called: -
ANSWER reversion
,Operating expenses used for valuation purposes generally do not include: -
ANSWER depreciation expense
Operating expenses that generally do not vary with occupancy and have to be paid whether
the property is occupied or vacant are called: - ANSWER fixed expenses
Expenses that generally vary with the level of occupancy or the extent of services provided
are called: - ANSWER variable expenses
Full recovery of amount invested is the: - ANSWER return of investment
Generally, higher overall cap rates are associated with: - ANSWER less desirable properties
A revaluation lease - ANSWER Provides for periodic rent adjustments based on the
market rental rate of the space
Potential gross income is - ANSWER amount that would be received from rental properties if
all units were occupied all year
A property sold for $555,000. The buyer anticipated the potential gross income would be
$93,000, the vacancy would be 5%, and expenses would be 53% of EGI in the year after
the purchase. What is the overall capitalization rate (RO)? - ANSWER R = NIR / EGIM
NIR=1-OER=1-.53=.47
EGI = PGI - (V+C) = 93,000 - 4,650 = 88,350
V = EGIM * EGI
555,000 = EGIM * 88,350
EGIM = 6.28
R = NIR / EGIM = ..28 = .0748 or 7.48%
, An allowance for vacancy and collection loss is estimated as a percentage of: - ANSWER
potential gross income
The anticipated income that remains after deducting all operating expenses from effective
gross income but before mortgage debt service is: - ANSWER net operating income
A triple-net (absolute net) lease - ANSWER would have the lowest ratio of operating
expenses to gross income incurred by the landlord.
The operating expense ratio for income property is typically: - ANSWER complement of the
net income ratio
In determining income and expenses the first step is - ANSWER a lease and rental analysis
Effective gross income is income after an allowance for: - ANSWER vacancy rates
In a high rise 100-unit apartment building there is a basement laundry area that brings in
$100 monthly from the concessionaire. The laundry income is - ANSWER Added to before-tax
cash flow
In an appraisal of income property, which of the following items should be excluded from
the expense statement? - ANSWER depreciation
Overage rent is the: - ANSWER percentage rent over the guaranteed
Painting and redecorating of an apartment unit is a(n): - ANSWER operating expenses
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