Property Valuation
An Alaska appraiser determines that a property has an 'as-is' value of $400,000 and a 'value subject to completion' of $450,000 for a $75,000 renovation project. This analysis suggests:
AThe renovation will add $75,000 to value
BThe renovation will add $50,000 to value — less than its cost of $75,000✓ Correct
CThe renovation will add $25,000 to value above its cost
DThe renovation is not economically feasible
Explanation
Value after renovation: $450,000. Value before: $400,000.
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Key Terms to Know
Appraisal
A professional estimate of a property's market value prepared by a licensed or certified appraiser.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Net Operating Income (NOI)The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
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