CA Real Estate Principles Course » 2021 » Section 16 Unit 4 Exam

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Question #1
The income a property could bring if it’s fully leased is known as the ______.
A.   Potential gross income
B.   Effective gross income
C.   Depreciated gross income
D.   Net operating income
Question #2
Capitalization is the process of using ______.
A.   Capital to build equity
B.   Income to calculate value
C.   Sales to determine income
D.   Value to calculate income
Question #3
A comparable property sold one month ago for $400,000. That property has a three-car garage, whereas the subject property you’re preparing to list only has a two-car garage. What should you do to determine the subject property’s market value?
A.   Adjust the subject's price up
B.   Adjust the comparable's price down
C.   Adjust the comparable's price up
D.   Adjust the subject's price down
Question #4
Which one of the following is a description of economic depreciation?
A.   The asset is worth less because the economy took a downturn.
B.   The asset is worth more because of capital improvements.
C.   The owner/investor is making less income from the property than previously.
D.   Investors can take a business deduction for annual depreciation.
Question #5
A property valued at $500,000 is returning a net annual income of $45,000. What is the cap rate for this investment?
A.   9%
B.   8%
C.   7.50%
D.   12.50%
Question #6
"Effective gross income" most closely means ______.
A.   Income after losses from vacancies and credit losses are deducted from potential gross income
B.   Income that a property could bring if it were leased at full capacity
C.   Income after taxes are deducted
D.   Income after operating expenses are deducted
Question #7
The Siegels are purchasing a commercial investment property and plan to use straight-line depreciation on their financial statements and tax calculations. Which of the following would NOT be included in the Siegels' depreciation basis calculations?
A.   The cost of the title insurance for the property
B.   The cost of the electrical system upgrades they did after purchase
C.   The price that they paid for the property, minus any land costs
D.   The loan origination and lender fees that they paid at closing
Question #8
What's the definition of "potential gross income"?
A.   Income that a property could bring if fully leased
B.   Income received after expenses are deducted
C.   After-tax income
D.   Before-tax income

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