Unit 9: Review Exam

Which term means the ability to sell property WITHOUT losing the initial investment?

• leverage

• depreciation

• appreciation

• obsolescence

Which of the following is NOT able to be depreciated for tax purposes on commercial property?

• land

• building

• furniture

• appliances

Which is a CORRECT example of positive leverage?

• reduction of value due to any cause

• an increase in value above the cash invested

• a high yield on borrowed money

• positive cash flow

Which characteristic is a disadvantage of a real estate investment?

• management considerations

• tax code treatment

• return on investment

• leverage

A licensee who specializes in the sale, purchase, or lease of businesses is a(n):

• business broker

• lease broker

• mortgage broker

• stock broker

Which item is added to rental income to calculate effective gross income?

• other income

• credit and vacancy allowance

• potential gross income

• net operating income

The method of estimating value as a multiple of monthly gross rental income is:

• gross rent multiplier

• capitalization rate

• income approach

• IRV formula

Appraiser has been assigned to estimate the value of a 12-unit apartment building. The most reliable estimate of value is likely to result from an analysis of income capitalization using which approach?

• sales comparison

• cost

• gross rent multiplier

• income

As net operating income increases, present value:

• remains constant

• decreases

• increases

• may either increase or decrease

Which type of income is used to compute a gross rent multiplier?

• net operating income

• gross monthly income

• gross annual income

• net annual income