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LOS f, (Part 2): Calculate the value of a property using the sales comparison and income approaches. ffice ffice" />
Q1. A portfolio manager is considering the purchase of an office building. He has identified the major characteristics of a property that affect value, and has assigned a quantitative rating to each one, based upon recent comparable sales in the area. Using a regression model, he has developed benchmark values for each characteristic, which he will use to estimate the market value of the potential investment. This method of estimating property value is best described as the:
A) hedonic price estimation.
B) sales comparison approach.
C) regression price model.
Correct answer is A)
The sales comparison approach uses recent transactions to estimate a benchmark value. The regression price model is a fictitious model. The hedonic price model is a
variation of the sales comparison approach, but is a more formalized, structured approach.
Q2. The data below pertains to an office building’s next reporting period:
- Gross rental income = $6.5 million.
- Operating expense = $2.3 million.
- Financing expense = $900,000.
- Depreciation expense = $750,000.
- Vacancy rate = 8.5%.
The market expects a return of 12.3%. The value of the office building is closest to:
A) $16.24 million.
B) $22.33 million.
C) $29.65 million.
Correct answer is C)
Net operating income (NOI) = gross rental income × (1 ? vacancy rate) ? operating expenses
NOI = $6.5 million × (91.5%) ? $2.3 million
NOI = $3.6475 million
Value = NOI / market cap rate
Value = $3.6475 million / 12.3%
Value = $29.6545 million
Q3. A real estate agent contacts an investor regarding a property that has recently come on the market. The real estate agent can provide reliable information regarding the property’s net operating income, as well as the prevailing market cap rate, based on recent comparable sales. The investor can best estimate the market value of the property, with the information supplied by the real estate agent, using the:
A) discounted cash flow model.
B) income approach.
C) sales comparison approach.
Correct answer is B)
The sales comparison approach uses recent transactions to estimate a benchmark value. The discounted cash flow model is used as a check on investment valuation. The income approach uses a property’s NOI, divided by the market cap rate, to estimate market value.
Q4. An investor with a large real estate portfolio must estimate the value of his holdings at year-end. Given the following data for an apartment building in the portfolio, estimate the appraised value using the income approach:
|
NOI |
$165,000 |
|
Marginal tax rate |
28% |
|
Market cap rate |
9% |
A) Need additional information to calculate.
B) $1,833,333.
C) $1,319,999.
Correct answer is B)
Appraisal price = NOI / Market cap rate = $165,000 / 0.09 = $1,833,333. Remember that all calculations for the income approach are made pre-tax.
Q5. John Williams wants to purchase an apartment complex. The complex consists of 75 units each renting for $700 per month. The estimated vacancy and collection loss rate is 7%. The insurance for the building is $40,000 annually and taxes are $22,000 annually. Utilities are $18,000 and the maintenance expense is $29,000.
Assume a market cap rate of 11%. Recent sales of nearby apartment complexes have resulted in the following information.
|
Characteristics |
Units |
Slope Coefficient in $ per Unit |
|
Proximity to downtown |
Miles |
-350,000 |
|
Vacancy rate |
Percent |
-500 |
|
Building size |
Units |
+75,000 |
Williams' proposed apartment complex is 4 miles away from downtown and has an estimated vacancy rate of 6%.
What is the net operating income (NOI) for Williams' proposed apartment complex?
A) $498,900.
B) $436,153.
C) $476,900.
Correct answer is C)
NOI = (75)(700)(12)(0.93) – $40,000 ? $22,000 ? $18,000 ? $29,000 = $476,900.
Q6. Using the sales comparison approach, the value of the apartment complex is:
A) $4,060,000.
B) $4,222,000.
C) $3,894,500.
Correct answer is B)
Value = (-350,000)(4) + (-500)(6) + (75,000)(75) = 4,222,000
Q7. Using the income approach, the value of Williams' apartment complex is:
A) $4,335,455.
B) $4,525,455.
C) $5,727,273.
Correct answer is A)
Appraisal price = NOI / market cap rate = $476,900 / 0.11 = $4,335,454.55
[此贴子已经被作者于2009-2-28 17:06:26编辑过] | 
发表于 2009-2-28 17:05
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