REE 3043 Study Guide - Midterm Guide: Secondary Mortgage Market, Balloon Payment Mortgage, Freddie Mac
Document Summary
Ree3043 exam 2 study guide ch 8, 9 and 10. The current value of a property is therefore a function of the income stream it is expected to produce. Value = present value of anticipated income. Often called capitalization capitalize= to convert future income into a present value. Direct capitalization (with an overall cap rate) Discount all expected future cash flows at discount rate. Same as using the price earnings ratios to value common stock. Find value as a multiple of first year net income. Multiple is obtained from sales of comparable properties. Similar in spirit to valuing a stock using a price/ earnings ratio. Process of estimating a property"s market value by dividing a single year noi by cap rate. Discounts all expected future cash flows at required rate of return (irr) Net annual holding period (includes net income from expected property sale)
