Property Valuation
The 'physical life' of a building is estimated as the total years until the structure physically deteriorates to the point of being unsafe. For appraisal purposes, the more important concept is:
AThe building's aesthetic life
BThe economic life—how long the building generates positive returns✓ Correct
CThe legal life determined by zoning
DThe tax life determined by IRS depreciation schedules
Explanation
Physical life is the maximum duration of a structure, but economic life is more relevant to value—it is the period during which the building contributes positively to the property's total value (income or utility exceeds costs).
People Also Study
Related Connecticut Questions
- The 'remaining economic life' of a Connecticut building is estimated as:Property Valuation
- A Connecticut appraiser determines that a property has a remaining economic life of 35 years and a current effective age of 15 years. The total economic life estimate is:Property Valuation
- A Connecticut appraiser estimates the reproduction cost of a building at $850,000. The physical depreciation is estimated at 25%, functional obsolescence at 10%, and external obsolescence at 5%. The land value is $150,000. What is the indicated value by the cost approach?Property Valuation
- If a Connecticut income property has an NOI of $90,000 and the market cap rate is 6%, what is the estimated value using the income approach?Property Valuation
- A buyer borrows $360,000 at 6% for 30 years. The monthly P&I payment is $2,158. How much total interest will be paid over the life of the loan?Real Estate Math
- A Connecticut borrower's gross monthly income is $7,500. A conventional lender requires the total DTI to be 43% or less. What is the maximum total monthly debt including the mortgage?Finance
- A Connecticut property owner bought a building for $300,000 and made $45,000 in improvements. After 5 years, they sold it for $415,000. What was the total return on investment?Real Estate Math
- A Connecticut borrower has a gross monthly income of $7,500. The lender uses a 43% back-end DTI limit. The maximum total monthly debt payments (including the mortgage) allowed is:Finance
Key Terms to Know
Depreciation
A reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
ZoningLocal government regulations that control land use by dividing areas into zones specifying permitted uses, building sizes, and densities.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Math Concepts
Study This Topic
Practice More Connecticut Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Connecticut Quiz →