Review Questions

Are value, price, and cost the same thing?

As risk increases, what happens to the capitalization rate?

Can two properties that are exactly the same physically have different cap rates?

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User markets generate ____, capital markets generate ______, and property markets generate ______

If the capital market decides that real estate is more risky that other investments, what happens to values, and why?

Explain the cost approach

Can a building ever have negative value?

What is the difference between investment value and market value?

How would you estimate the value a religious building, like a mosque?

What are four transaction adjustments?

What are five examples of physical adjustments?

What is the difference between reproduction cost and replacement cost?

What is physical depreciation?

What is functional obsolescence?

What is external obsolescence?

What two common methods are used under the income approach?

What is the difference between the two methods?

What do you have to do to estimate NOI?

What do appraisers call their forecasts of income and expenses?

If I charge lower rents that my neighbors, what would I expect to happen to my vacancy rate?

Could two properties have different rental rates but the same effective gross incomes?

What is CAPX?

What is more difficult to do in Riyadh, get accurate current data, or analyze what it means?

Should you give all of your data equal weight?

Do you use a direct cap rate in DCF?

When a sale occurs what two ratios can you always estimate?

What are the pros and cons of the discounted cash flow analysis?

What is the difference between a standard sale and a Contract for Deed?

Is there a difference between possession and ownership?

What is an ARM mortgage versus a Fixed Rate Mortgage?

What is the difference between legal title and equitable title?

What is a contingency?

What is a teaser rate?

What is a balloon payment?

What is a prepayment penalty?

What type of property general has the lowest risk from a lender’s perspective?

If a property is generating 100,000 in NOI and the maximum debt service ratio a lender is willing to accept is 1.35, how much would the maximum payment?

If the lender were to amortize over 20 years at 5%, what would the loan amount be?

A property was purchased for 2,000,000 an is generating 120,000 in NOI. You can get a loan for 1,300,000 amortized for 20 years at 5 percent. What will be the rate of return to the equity. Will you have positive or negative leverage?