REAL 1820 Study Guide - Midterm Guide: Income Approach, Transunion, W. M. Keck Observatory
9 Sep 2014
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A few assumptions: (1) for simplicity, assume the rent is paid on a yearly basis instead of monthly basis. (2) incomes generated from the property: regular income: net operating income (noi) possible income: sales proceeds if you sell the property after some years. (3) real estate market has its own rate of return called capitalization (or cap) rate, denoted as r (4) market value of the property = present value of all future incomes. Check into financial background: employment status/job stability, income details, assets (including the source of down payments) and liabilities (loans on car, education, etc , credit history & scores (two channels equifax or transunion score between a and f where a is 91 100%, the details of the property to be purchased, two affordability ratios: gross debt service (gds) ratio & total debt service (tds) ratio, additional info.
