4. Consider the following statement: The safety margin is used to ensure that income from a property is sufficient to cover required payments". This statement is: (1) true, because the safety margin sets a maximum on the value of the property which can be obtained. (2) true, because the safety margin limits the percent of the net operating income that can be used to make mortgage payments. (3) false, because the required mortgage payments do not depend on the income from a property. (4) false, because the safety margin is used to ensure that the income 5. When appraising commercial properties with direct capitalization, the appraiser will: (1) compare to residential properties in the same location that have recently sold in arm's-length transactions. (2) use the effective gross income calculated from the revenue and expense analysis to estimate the property's market value. (3) apply some judgement when considering comparables. (4) estimate the market value by dividing the market capitalization rate by the net operating income. 6. Mr. and Mrs. Paterson have approached a lender to obtain a $675,000 mortgage loan to purchase a pet shop. Current interest rates are 7.25% per annum, compounded semi-annually. Monthly payments will be amortized over 20 years and the loan will have a 5 -year term. The lender has determined that the property will generate an annual net operating income of $80,000. To obtain lending value, capitalize the net operating income at a rate of 8% per annum, compounded annually. If the lender applies a 75% loan-to-value ratio and a 1.2 debt coverage ratio, what is the largest loan that Mr. and Mrs. Paterson can obtain (rounded to the nearest hundred dollars)? (1) $750,000 (2) $675,000 (3) $670,700 (4) $708,700 7. Which of the following statements regarding operating expenses is FALSE? (1) In rental apartment properties, the landlord is often responsible for all expenses. (2) With long-term occupation leases, the contract may require full or partial escalation of some or all expenses to the tenant. (3) In some non-residential leases, the landlord will be responsible for structural repairs including the exterior walls, roof, and structure. (4) "Net net lease" is the standard term used when discussing leases in which operating expenses are paid by the tenant