175 Multiple choice questions
from the operation of a business or the management of property,
customarily stated on an annual basis. Gross income is income the
property from all sources.
amount of rental income that could be expected from a property if
available for rent on the open market, indicated by the prevailing
rental rates for comparable properties under similar terms and
conditions; distinguished from contract rent, which is the actual rental
for the subject property as specified in a lease; also referred to as
- The tax on harvested timber; a form of severance tax based on the
value of the timber where and when it is cut.
- The recovery of capital in equal, periodic, increments, over the remaining economic life of an asset.
actual amount of rent a property is earning as specified in a lease;
the existing rent on property as distinguished from rent that could be
expected if the property were available for rent on the open market.
rate that expresses the relationship between one year's income and the
corresponding total value of a property; or, in the case of R^e, with
the value of only the equity interest.
developed and implemented by an assessor to appraise selected accounts
periodically, in lieu of annual property statements.
- Income payments expected or hoped for by an investor.
- A tax on mineral or forest products at the time they are removed or
severed from the soil, usually regarded as a form of property
taxation. (Also see yield tax).
taxable property (both state and locally assessed) is assessed annually
for property tax purposes as of 12:01 AM on January 1. It is referred
to this name because on this date the taxes become a lien against all
real property assessed on the secured roll.
lease requiring the landlord to pay such charges against the property
as taxes, insurance, and maintenance costs. The tenant is only
responsible for rental payments.
- Audits not required by law, but authorized by section 470 and Rule 192 (e).
- The taxable value of a property against which the tax rate is applied.
- The period of time over which improvements to real property contribute to property value.
- The amount of money a buyer agrees to pay and a seller agrees to
accept in an exchange of property rights; based on a
particular transaction, not necessarily on what the typical buyer
would pay or the typical seller would accept.
single year's cash flow after debt service but before income taxes
(i.e., a single year's net income before recapture (NIBR) less debt
annual net income remaining after deducting all operating expenses but
before deducting other charges such as recapture, debt service, and
property taxes. For property tax appraisal purposes, this is capitalized
into an indicator of value using various income capitalization
- The capacity of goods to evoke a desire for possession; wantedness; want-satisfying power.
written document in which the rights to use and occupy land or
structures are transferred by the owner to another for a specified
period of time in return for a specified rent.
value approach using the following procedures to derive a value
indicator: (1) estimate the current cost to reproduce or replace an
existing structure without untimely delays; (2) deduct all accrued
depreciation; and (3) add the estimated land value and an amount to
compensate for entrepreneurial profit (if present).
real property subject to article XIII A of the California Constitution,
the base year full value adjusted for any given lien date as required
by law or the full cash value for the same date, whichever is less, as
set forth in section 51(a). For personal property, the full cash value
(market value) on the lien date each year.
required for the labor and materials necessary to develop and construct
an improvement; sometimes referred to as "hard costs."
technique in which the capitalization rates attributable to the
components of a capital investment are weighted and combined to derive a
weighted-average rate attributable to the total investment.
- The effect of borrowed funds, which may increase or decrease the return that would be realized on equity free and clear.
- Person who owns, claims, possesses, or controls a property on the lien date.
- (1) Quantity Survey Method, (2) Square Foot Method, (3) Unit-In-Place Method
- Latin phrase meaning "in proportion to the value." In California, the property tax is considered to be an ad valorem tax.
- The rights of the lessor at the expiration of a lease; the estate returned or
due to be returned.
capitalization method used to convert future benefits to present value
by discounting each future benefit at an appropriate yield rate or by
developing an overall rate that reflects the investment's income
pattern, value change, and yield rate.
that are located outside the subject property (often termed
infrastructure) that add value to land. Includes such works as
transportation systems; sewage, water and drainage systems; and
facilities for electric and gas power and telephonic communication.
rehabilitation is defined as any rehabilitation, renovation, or
modernization, which converts an improvement to the substantial
equivalent to new.
- System used to select and conduct audits.
most profitable use of a property at the time of the appraisal; that
available use and program of future use that produces the highest
present land value; must be legal, physically possible, financially
feasible, and maximally profitable.
- The restoration of a property to satisfactory condition without
changing the plan, form, or style of a structure. It involves curing
ratio between the mortgage amount and the value of the property pledged
as security for the debt; usually expressed as a percentage.
minimum rate of return on invested capital. Theoretically, the
difference between the total rate of return and the safe rate is
considered a premium to compensate the investor for risk, the burden of
management, and the illiquidity of the capital invested; also known as
the risk-free rate.
- The act of process of altering; a modification or change.
- The (possible) total income of a property before deducting vacancy and collection losses or operating expenses.
- The age indicated by the condition and utility of the property.
buildings, structures, fixtures, and fences erected on or affixed to
the land; all fruit, nut bearing, ornamental trees and vines, not of
natural growth, and not exempt from taxation, except date palms under
eight years of age
transfer of a present interest in real property, including the
beneficial use therof, the value of which is substantially equal to the
value of the fee interest.
corrective measures to bring a property into conformity with changes in
style, whether exterior or interior, or additions necessary to meet
standards of current demand. Modernization normally involves replacing
part of the structure or mechanical equipment with modern replacements
of the same kind. For property tax purposes, modernization implies
curing functional obsolescence and physical deterioration to the degree
that the structure or fixture is substantially equivalent to new.
- Placing a value on property for the purpose of property taxation.
referred to as full cash value or fair market value. It means the
amount of cash or its equivalent that property would bring if exposed
for sale in the open market.
for appraisal purposes. Includes all market costs (direct and indirect)
necessary to purchase or construct property and make it ready for its
relationship between sale price (or value) and gross income, expressed
as a factor; used to estimate value as a multiple of income. Gross
income is usually (though not always) expressed in annual terms, and
includes income to the property from all sources. In an apartment
property, for example, the gross income could be the sum of living unit
rent, parking space rent, vending machine income, and laundry facility
relationship between sale price (or value) and gross rent, expressed as
a factor; used to estimate value as a multiple of income. Gross rent is
usually (though not always) expressed in annual terms.
non-amortizing loan in which the lender receives interest only during
the term of the loan and recovers the principal in a lump sum at the
time of maturity.
loss in utility and value due to changes in the desirability of the
property; attributable to changes in tastes and style or the result of a
poor original design. This form of deprecation is curable if the cost
to cure it is equal to or less than the value added by curing.
- The periodic expenditures necessary to maintain the real property and
continue production of the effective gross income, assuming prudent and
competent management; sometimes referred to as "allowable expenses."
- The rate of return of an invested amount in a wasting asset. Also called the Capital Recapture Rate.
- Any rate used to convert income into an indicator of value; a ratio that expresses a relationship between income and value.
approach to value by reference to sale prices of the subject property
or comparable properties; the preferred approach when reliable market
data are available.
capitalization method used to convert a single year's income expectancy
into an indicator of value, either by dividing the income estimate by
an appropriate rate or by multiplying the income estimate by an
- Uncertainty about the outcome of future events; uncertainty about the
future profitability of investments or projects; the possibility of not
receiving the projected income.
of the cost-estimating methods. Under this method, all costs of each
piece of material and all labor are estimated and summed; this method
accounts for the quantity and quality of all the agents of production
necessary to develop and construct an improvement.
- The actual number of years since an improvement was constructed.
- The possession of, claim to, ownership of, or right to the possession of
land; all mines, minerals, and quarries in the land; all standing timber
whether or not belonging to the owner of the land, and all rights and
privileges appertaining thereto; and improvements; in California property
tax law, the term is synonymous with "real estate."
- A capital sum; a payment for reduction of the capital borrowed as distinguished from the payment of interest.
buyer will not pay more for one property than for another that is
equally desirable. This principle assumes rational, prudent market
behavior with no undue cost due to delay. When several similar or
commensurate commodities, goods, or services are available, the one with
the lowest price attracts the greatest demand and widest distribution.
complement of depreciation; if a property is 20 percent depreciated,
its percent good is 80 percent; percent good refers to the portion of
benefits remaining in an asset compared to the total benefits when new.
amount of money a buyer agrees to pay and a seller agrees to accept in
an exchange of property rights; sale price is based on a particular
transaction, not necessarily on what the typical buyer would pay or the
typical seller would accept.
- A rate of return on equity capital as distinguished from the rate of return on debt capital.
loss in utility and value due to an incurable defect caused by external
negative influences outside the property itself; results from the
immobility of real property.
- One who conveys the right to use and occupy property under a lease agreement; a landlord.
loss in utility and value due to some physical deterioration in the
property; considered curable if the cost to cure it is equal to or less
than the value added by curing it.
transaction in which an investor purchases property and leases it back
to the seller, generally under lease terms and conditions that were
negotiated at the time of the sale.
money or money's worth that the property will yield over and above
vacancy and collection losses, including ordinary income, return of
capital, and the total proceeds from sales of all or part of the
- The components into which a property may be divided in order to make
comparisons, e.g., an apartment might be compared by price per apartment unit, price per room, price per gross square footage, or price per leasable square footage.
listing of all taxable property within a county. It identifies, at a
minimum: (1) the property (usually by APN); (2) the tax-rate area where
the property is located; (3) the name (if known) and mailing address of
the assessee; (4) the assessed value of the property, including separate
assessed values for land, improvements, and personal property; (5)
penalties (if any); and (6) the amount (if any) of specified exemptions.
Distinct assessment rolls include the locally assessed secured and
unsecured regular assessment rolls, the locally assessed supplemental
assessment roll, and the state assessed roll (added to the locally
assessed secured roll).
average that is calculated by weighting each component by a factor that
represents its relative importance to the whole, multiplying each
component by its assigned weight, and adding the products; used in the
band of investment method.
- The ratio of annual cash flow to the investment
- The periodic payment that covers the interest on, and retirement of, the outstanding principal of the mortgage loan
- The additional amount received as compensation (profit or reward) for use of an investor's capital until it is recaptured.
recapture (recovery) of invested capital, usually through income and/or
reversion; Recapture of Capital; Recovery of Capital.
return of invested capital; in real estate investments, capital may be
returned gradually as part of the annual income; this can be done all or
in part through resale of the property, or through a combination of
- Certain owners and users of property assessed by the State Board
of Equalization on the Board roll.
- The percentage rent paid over and above the guaranteed minimum rent or base rent.
accordance with section 110.1, this value is a property's fair market
value as of either the 1975 lien date or the date the property was last
purchased, newly constructed, or underwent a change in ownership after
the 1975 lien date.
- Conversion of future payments to present value.
- An assessment of the full cash value of property as of the date a
change in ownership occurs or new construction is completed
which establishes a new base year value for the property or for the
- Multiplier used to "trend" the historical cost of property an estimated reproduction or replacement cost new.
- Possessory interests in publicly owned real property. Excluded
from the meaning are any possessory interests in real property
located within an area to which the United States has exclusive
jurisdiction concerning taxation. Such areas are commonly
referred to as federal enclaves.
- The power of one commodity to command other commodities in
exchange; a ratio of exchange; present worth of future net benefits.
ownership unencumbered by any other interest or estate, subject only to
the limitations of eminent domain, escheat, police power, and taxation.
- The ratio of one quantity to another.
lessee's interest in property; the right to use and occupy real
property during the term of a lease, subject to any contractual
- Property normally increase in value as it progresses through
production and distribution channels.
lessor's interest in property; an ownership interest held by a landlord
with the right of use and occupancy conveyed by lease to others; the
right to receive rent stipulated in the lease and to receive the
property (the reversionary right) at the end of the lease term.
- The term of ownership of an investment.
- Investment features that provide relief from income taxes or allow the investor to claim deductions from taxable income.
- Remainder of the secured roll. The taxes are a personal liability of the owner.
- The return on investment.
- Interest on the sum of principal and the accrued interest, combined at regular intervals; interest on interest.
absolute legal possession and ownership of land, property, or rights,
including mineral rights. Can be sold (in its entirety or in part) or
passed on to heirs or successors.
- A procedure for deriving a value indicator by comparing the property being
appraised to similar properties recently sold, by adjusting the sale prices of
the comparables using elements of comparison.
- The unit that (1) people in the market typically buy and sell or that is normally valued separately.
required by law. For taxpayers owning or possessing tangible business
personal property and fixtures with a full cash value of $400,000 or
more, section 469 requires an audit at least once in each four-year
- Means of collecting data relevant to the determination of taxability, situs, and value of property.
- A measure of investment return (usually annualized) that is applied
to a series of incomes to obtain the present value of each;
examples are the interest rate, the discount rate, the internal rate of
return, and the equity yield rate.
lump-sum benefit that an investor receives or expects to receive at the
termination of an investment. In a taxable possessory interest, the
land and improvements that revert back to the public owner at the
termination of the taxable possessory interest.
decrease in utility resulting in a loss in property value; the
difference between estimated replacement or reproduction cost new as of a
given date and market value as of the same date. There are three
principal categories of deprecation: Physical, Functional and External.
- The annual rate of return on capital that is commensurate with the risk or
uncertainty assumed by the investor; the rate of return or yield required to
attract capital to the level of risk or uncertainty of that investment.
- The same as market value.
- The periodic income attributable to the interests in real property
annualized rate of return on invested capital that is generated or is
capable of being generated within an investment over a period of
- The combining of two or more parcels, usually but not necessarily contiguous, into one ownership or use.
techniques (within the income approach) in which an income amount is
allocated to a property component of unknown value after subtracting the
income return required by the property component of known value. This
income amount is then capitalized into an estimate of value of the
amount of rental income that could be expected from a property if
available for rent on the open market, as indicated by the prevailing
rental rates for comparable properties under similar terms and
conditions; economic rent is distinguished from contract rent. Also
referred to as market rent.
mathematical process of solving for an unknown quantity by trial and
error, starting with a trial quantity and approaching the solution with a
series of repetitive calculations until the error is negligible.
- The present or anticipated under-supply of an item relative to the demand
- An agreement in which the lessee in a prior lease conveys the right of use and occupancy of a property to another.
- The quantity resulting from the division of 1 by a given number.
- The estimated period during which the improvement will continue to contribute to a property's value.
- A steady flow of payments or benefits from an investment or property.
of the cost-estimating methods. This method uses the known costs of
similar buildings, adjusted for physical differences and market
conditions. The costs are estimated in terms of dollars per unit, such
as $100 per square foot; costs per unit for properties of equal utility
are often obtained from data compiled and published by cost-estimating
firms. Also known as the Comparative Unit method.
- A type of level annuity in which income payments are received at the end of each period.
part of the assessment roll containing state assessed property and
property the taxes on which are a lien on real property sufficient, in
the opinion of the assessor, to secure payment of taxes.
- Any method of converting an income stream or a series of future income payments into an indicator of present value.
of the cost-estimating methods. This method adds together the unit cost
of each component of an improvement, such as the cost of a foundation, a
wall, or a roof; costs for walls and foundations are usually estimated
per linear foot and are often obtained from data compiled and published
by cost-estimating firms.
- Includes all matters and things—real, personal, and mixed—that
are capable of private ownership.
- A form of concurrent property ownership in which multiple
owners have an undivided interest in the property.
base year value, as determined in accordance with Revenue and taxation
Code section 110.1, with the ADJUSTMENTS permitted by subdivision (b) of
section 2 of article XIII A of the California Constitution and section
- Period of time beginning July 1 and ending June 30.
method of converting expected future benefits into an indicator of
present value; the discounting of projected income to a present value.
lease where the lessee pays not only for the use of the property, but
also for stipulated additional charges such as property taxes,
insurance, and maintenance.
- The place where property is legally situated; the more or less
permanent location of the property.
- A figure that is multiplied by income to produce an estimate of value.
- The rate of return on debt capital; the price paid for borrowing money.
- An increment of value that results when two or more sites are assembled
under single ownership, producing greater utility.
- Assessment made after the completion of the regular assessment roll.
- Includes all property except real property.
- An allowance for reductions in potential income attributable to vacancies, tenant turnover, and non nonpayment of rent.
- The increase in property value resulting from an excess of demand for a property relative to its supply.
the total value of an operating business enterprise. It includes the
value of the real property, tangible personal property (e.g., machinery
and equipment), labor, the marketing operation, and intangible assets
and rights. It includes the incremental value of the business concern,
which is distinct from the value of the real property.
- The relationship between the anticipated net income before deducting for
recapture (NIBR) and the sale price; the rate implies the investor's
perception of both return on and recapture of the investment.
estate, or real property, except improvements. It includes the
possession of, claim to, ownership of, or right to possession of land;
and all mines, minerals, and quarries in the land; all standing timber
whether or not belonging to the owner of the land; all standing timber
whether or not belonging to the owner of the land; and all rights and
privileges appertaining thereto.
to the property only from rental of the principal improvements. In an
apartment property, for example, the gross rent would be from living
units only would exclude income from parking space rent, vending
machine, and laundry facility income.
- The cost required to replace an existing property with a property that has
- One who has the right to use or occupy property under a lease agreement; a tenant.
action of continuing, carrying on, preserving, or retaining something;
it is the work of keeping something in proper condition. Maintenance
performed on real property is normal when it is regular, standard, and
typical. Normal maintenance keeps a property in condition to perform
efficiently the service for which it is intended and ensures that a
property will experience an economic life of typical duration.
- Roll covering period starting July 1 of the current calendar year to
June 30 of the next year. Assessment period for the regular roll
must be completed on or before July 1.
- The cost required to reproduce an exact replica of an existing property
outlay of money or money's worth, including current expenses and
capital expenditures required to develop and maintain the estimated
- A selected yield rate used to convert expected future payments into an estimate of present value.
portion of the increases in value of a total property upon completion
that is attributable directly to the qualifying new construction.
- Interest in real property that exists as a result of (1) a possession of
real property that is independent, durable and exclusive of rights
held by others in the real property, and that provides a private
benefit to the possessor, except when coupled with the ownership
of a fee simple or life estate in the real property in the same
person; or (2) a right to the possession of real property, or a claim
to a right to the possession of real property, that is independent,
durable and exclusive of rights held by others in the real property,
and that provides a private benefit to the possessor, except when
coupled with the ownership of a fee simple or life estate in the real
property in the same person; or (3) possession of taxable
improvements on tax-exempt land.
specific value of property to a particular investor, based upon
individual investment requirements, as distinguished from the concept of
- The holding period; a period of time over which net income is projected
for valuation purposes; a presumed period of investment in property.
- The principle that value is created by the expectation of benefits to be derived in the future.
capitalization method in which a discount rate is applied to a series
of projected income payments, including the reversion, in order to
arrive at an estimate of present value (i.e., current market value). The
DCF method can be applied with any yield capitalization technique.
- The total cost of a property when it was originally constructed.
amount of cash or its equivalent that property would bring if exposed
for sale in an open market under conditions in which neither buyer nor
seller take advantage of the exigencies of the other and both with
knowledge of all the uses and purposes to which the property is adapted
and for which it is capable of being used, and of the enforceable
restrictions upon those uses and purposes.
- The estimated potential gross income less allowances for vacancy and collection losses.
- The value of a future payment or series of future payments
discounted to the current date or to time period zero.
items of personalty that become part of the product or are themselves a
product that is held for sale or lease in the ordinary course of
- The expenditure required to develop and construct an improvement or acquire personal property.
act of adding implies that there is a pre-existing structure or base to
which something is added. These are made to land and improvements,
of two or more numbers that when multiplied together produce a third
number; a multiplier. A capitalization factor is the reciprocal of a
- The value of property at the end of its economic life in its present use; the
estimated market value for an entire property (e.g., a house) or for a part (or parts) of a property (e.g., the plumbing fixtures or doors of a house) that is removed from the premises for use elsewhere.
- Substituting an item that is fundamentally the same type or utility for an item that is exhausted, worn out, or inadequate.
rate that reflects the relationship between the equity dividend and the
equity investment (i.e., a single year's net income before recapture
less debt service divided by the the equity investment); a rate used to
convert the equity dividend into an indicator of equity value; also
known as the equity dividend rate, the cash on cash rate or the cash
- The ratio of total expenses, excluding debt service, to either potential or effective gross income.
item of tangible property, the nature of which is originally personal
property, but which is classified as real property for property tax
purposes because it is physically or constructively annexed to real
property with the intent that it remain annexed indefinitely.
capitalization rate for debt; the ratio of the annual debt service to
the principal amount of the mortgage loan; the total annual amount
required to pay off an amortizing loan with level monthly payments,
expressed as a percentage of the original loan amount.
- The ratio of total operating expenses to the effective gross income.
- The rate of return of an invested amount in a wasting asset.
- The difference between gross return and gross outgo.
- An edifice or building; an improvement whose primary use or
purpose is for housing or accommodation of personnel, personalty,
or fixtures and has no direct application to the process or function of
the industry, trade, or profession.
yield capitalization, the number, usually obtained from financial
tables, that is multiplied by an income amount to produce an estimate of
- The percentage at which property on the secured roll is taxed.
Taxes on real property cannot exceed 1 percent of its taxable value
plus an amount to pay the interest and redemption charges on (1)
debts approved by voters prior to June 6, 1978, (2) debts approved
by a two-thirds vote of the qualified voters after that date, or (3)
effective January 1, 2001, certain bonded indebtedness for school
facilities approved by 55 percent of the voters.
actual or anticipated net income that remains after all operating
expenses are deducted from effective gross income, but before mortgage
debt service and book depreciation are deducted. Also referred to as the
Net Income Before deducting for Recapture.
- Any addition to real property, whether land or improvements (including
fixtures) since the last lien date; any alteration of land or improvements
(including fixtures) since the last lien date that constitutes a major
rehabilitation thereof or which converts the property to a different use.
outlay for items, other than labor and materials, required to develop
and construct an improvement; includes such costs as legal fees,
property taxes, construction financing, administrative expenses,
appraisal fees, and lease-up expenses; sometimes referred to as "soft
- A periodic series of obligatory payment. Can be level, increasing, decreasing, or a combination thereof.