IA Module 6 to 12

Market value multiplied by assessment ratio equals

• net income.
• assessed value.
• leasing expenses.
• property taxes.
• See Module 9 page Fixed Expenses for more information.

A property has potential gross income of $100,000 and a vacancy rate of 8% and operating expenses of $32,000. What is the operating expense ratio?

• 0.53
• 0.65
• 0.35
• 0.32
• See Module 9 page Tests of Reasonableness for more information.

A property is insured under a blanket policy covering all the owner’s properties. The blanket policy cost is $27,000 per year and the subject property policy represents 1/3 of the cost. If the insurer offers a 15% multi-property discount, what would be the cost of the subject property stand-alone policy?

• 7826
• $10588 (Step 1. Convert the blanket policy cost to the cost for a stand-alone policy. This is accomplished by converting the discounted cost to what it would have been had it not included the 15% discount. To solve for this, divide the discounted cost by the complement of the discount percentage. 100% - 15% = 85% $27,000 ÷ .85 = $31,765 Step 2. Multiply the solution by the percentage of the cost represented by the subject property policy, which is 33.333%. $31,765 x .3333333 = $10,588)
• 9529
• 9310
• See Module 9 page Fixed Expenses for more information.

A property is insured under a blanket policy covering all the owner’s properties. The blanket policy cost is $27,000 per year and the subject property policy represents 30% of the cost. If the insurer offers a 13% multi-property discount, what would the cost of the subject property stand-alone policy?

• 7168
• 10345
• $9310 (Step 1. Convert the $27,000 blanket policy cost to the cost for a stand-alone policy. This is accomplished by converting the discounted cost to what it would have been had it not included the discount. To solve for this, divide the discounted cost of by the complement of the discount percentage. 100% - 13% = 87% $27,000 ÷ .87 = $31,035 Step 2. Multiply the solution by the percentage of the cost represented by the subject property policy. $31,035 x .30 = $9,310.)
• 9529
• See Module 9 page Fixed Expenses for more information.

An example of a below the line item is

• debt service.
• fixed expenses.
• replacement allowances.
• variable expenses.
• See Module 9 page Operating Expenses for more information.

Annual debt service is deducted from

• net operating income.
• potential gross income.
• effective gross income.
• total expenses.
• See Module 9 page Operating Expenses for more information.

Competent management in the subject market would cost 5% of collected rent and 7% of the collected reimbursements. The subject property’s owner has been self-managing the property. Given the following, what is the appropriate management fee for the property? • $390,000 effective gross income from rent • $50,000 effective gross income from reimbursements • $380,000 collected rent • $40,000 collected reimbursements

• 34256
• 30800
• 21800
• 23000
• See Module 9 page Variable Expenses for more information.

Competent management in the subject market would cost 7% of collected rent and collected reimbursements. The subject property’s owner has been self-managing the property. Given the following, what is the appropriate management fee for the property? • $440,000 – effective gross income including reimbursements. • $380,000 – collected rent. •$40,000 – collected reimbursements

• 30800
• 10800
• 20394
• 29400
• See Module 9 page Variable Expenses for more information.

If the property described below has 30,000 square feet, what are its annual expenses per square foot? Potential Gross Income $2,000,000 Less Vacancy & Collection Loss (5%) – $100,000 Effective Gross Income $1,900,000 Fixed Expenses $175,000 Variable Expenses $425,000 Replacement Allowances $100,000 – $700,000 Net Operating Income $1,200,000

• 40
• 28
• 23.33
• 20
• See Module 9 page Reconstructed Operating Statement with Reimbursements for more information.

If a parking lot needs repaving every eight years and is now five years old, what is the annual replacement allowance using a straight-line premise if it costs $12,000 to repave?

• 2400
• 4000
• 1500
• 12000
• See Module 9 page Methods for Dealing with Replacement Allowances for more information.