Monday, June 29, 2009
Capitalization Approach to Value
Several of our students have been having problems understanding the cap rate, or capitalization approach, to estimating value of an income producing property. If you remember that the higher the net income produced by a property (or investment), the higher the value, it follows that a property returning 3% income is worth less that one returning 7%, all other things being equal and not considering radical changes in the properties' economic environment. By researching the sold statistics of income producing properties, an agent can calculate the rate of return investors are after. In other words, if most of the sold properties show a net income of around 5% (not considering cost of financing), then it is probably safe to estimate that the property you're trying to value should use 5%, or perhaps more, as a benchmark for estimated market value. Using the formula of Income (net after expenses) over Rate (in this case .05), estimated value can be calculated. So, if the subject property produced a net income of $35,000 and we know that figure should be around 5% of the value for investors to be interested, we can simply divide income by rate and suggest a market price of $700,000.
Tuesday, June 16, 2009
YourHouseAcademy.com
Your House Real Estate Academy is now offering online courses and has links on the site to the bookstore and Mr. Real Estate's Illinois Exam review, a series of CD's. They have also posted a series of informative articles designed to give a prospective real estate agent some additional information and advice. Here at Prudential Starck Realtors our Saturday morning course continues to crank out folks ready to sit for the Illinois exam: we had another 3 students pass the course final during the last session. If time is at a premium for you and you're not too far from Palatine give us a call about the workshop.
Tuesday, June 2, 2009
Prepare Differently for Broker License Exam
In February 2009 the multiple choice testing format for the broker license exam was changed to a scenario, information gathering, and decision making Simulation format. Whatever the reason, we now have an exam that is absolutely different from anything we've seen before and real estate educators are scrambling to figure out how to prepare broker students to pass this new test.
It's obvious that we cannot use the same teaching methods used in the past for the multiple choice test. The abysmal 35% passing rate for the first 3 months proves that. Our current textbooks are not designed for this type of testing. Many of the questions and situations in the new exam and not covered in the standard texts. That being said, the Simulation exam is not necessarily harder than the old multiple choice test: it's just different.
As before, the exam is given in 2 parts; the national portion and the state specific portion. There are still 40 state specific multiple choice questions. The national portion consists of 10 Simulation questions of which 8 are scored. The other 2 are questions that the testing service is evaluating. Each Simulation question consists of 5 to 8 different segments. After presenting the scenario, the information gathering segments will ask , "SELECT AS MANY AS YOU CONSIDER APPROPRIATE." The decision making segments will ask, "CHOOSE ONLY ONE ITEM IN THIS SECTION."
Real Estate agents are taught risk reduction techniques that require agents to ask numerous questions so that all bases are covered. The Simulation exam, however, awards points for proper responses and subtracts points for improper responses. Therefore it's important to know which are best. Fewer are selections are sometimes better than more. There are no math problems on the Simulation portion of the exam. Fifty percent of the Simulations concern residential real estate, 33% commercial simulations and 17% property management. Also, there's no going back. Answers cannot be changed.
The new test does not use branching. Branching is a testing model that brings the student to a different question based on the previous answer. There are 3 free sample Simulations at http://www.goamp.com/repSimTests.aspx. They're only designed, however, to give you an idea of what the exam looks like. They're not to be used as a learning tool. The questions are not Illinois specific and do not truly reflect the type of question you might see. The testing service does sell a sample exam on goamp.com that can be a good learning tool.
For more information contact Vince DePaul at http://www.blogger.com/Vince@YourHouseAcademy.com
It's obvious that we cannot use the same teaching methods used in the past for the multiple choice test. The abysmal 35% passing rate for the first 3 months proves that. Our current textbooks are not designed for this type of testing. Many of the questions and situations in the new exam and not covered in the standard texts. That being said, the Simulation exam is not necessarily harder than the old multiple choice test: it's just different.
As before, the exam is given in 2 parts; the national portion and the state specific portion. There are still 40 state specific multiple choice questions. The national portion consists of 10 Simulation questions of which 8 are scored. The other 2 are questions that the testing service is evaluating. Each Simulation question consists of 5 to 8 different segments. After presenting the scenario, the information gathering segments will ask , "SELECT AS MANY AS YOU CONSIDER APPROPRIATE." The decision making segments will ask, "CHOOSE ONLY ONE ITEM IN THIS SECTION."
Real Estate agents are taught risk reduction techniques that require agents to ask numerous questions so that all bases are covered. The Simulation exam, however, awards points for proper responses and subtracts points for improper responses. Therefore it's important to know which are best. Fewer are selections are sometimes better than more. There are no math problems on the Simulation portion of the exam. Fifty percent of the Simulations concern residential real estate, 33% commercial simulations and 17% property management. Also, there's no going back. Answers cannot be changed.
The new test does not use branching. Branching is a testing model that brings the student to a different question based on the previous answer. There are 3 free sample Simulations at http://www.goamp.com/repSimTests.aspx. They're only designed, however, to give you an idea of what the exam looks like. They're not to be used as a learning tool. The questions are not Illinois specific and do not truly reflect the type of question you might see. The testing service does sell a sample exam on goamp.com that can be a good learning tool.
For more information contact Vince DePaul at http://www.blogger.com/Vince@YourHouseAcademy.com
Monday, June 1, 2009
New Broker Exam - Instruction Methods
Vince DePaul, the dean of our real estate school, YourHouseAcademy, has just returned from a seminar in Springfield where at least part of the focus was on methods to teach to the new broker exam. That's the simulation type exam and I've been ranting about its difficulty, at least from the examples I've taken at the AMP website. I'm hoping we can get Vince to post some of what he learned down there and am using this blog entry as a sort of prod. Stay tuned.
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