Question

The depreciation rate is the rate at which the value of a property declines each year....

The depreciation rate is the rate at which the value of a property declines each year. Would you expect the depreciation rate on rental property to be higher or lower than that for owner-occupied property? Explain.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

The depreciation rate of on a rental property is expected to be higher than that for owner-occupied property. Depreciation refers to the loss in value of a property with time due to normal wear and tear. Therefore, when a property is used in a more careful way and when it undergoes better maintenance, the depreciation rate of the property is expected to be low. A rental property is less likely to be used well and maintained periodically than an owner-occupied property. So, the depreciation rate of on a rental property is expected to be higher than that for owner-occupied property.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Assume that you are considering purchasing a commercial property today (which is the beginning of Year...
Assume that you are considering purchasing a commercial property today (which is the beginning of Year 1) for $100,000. You as an investor have a discount rate of 25%. The property is expected to generate cash flows in the amounts of $10,000 at the end of year 1. However, for each and every year after Year 1 cash flows are expected to grow by a factor of 3.6%. Assume the property owner plans on holding this property for 10 years....
Last year, a property had an NOI $100,000 which is expected to increase by 3% per...
Last year, a property had an NOI $100,000 which is expected to increase by 3% per year. The investment horizon is 3 years at which time you expect the cap rate to be 10%. Determine the value of the property using the Discounted Cash Flow approach, for the three-year period. Use a 10% discount rate for the yearly cash flows and a 10% rate for the terminal value. a. $1,052,810 b. $1,109,024 c. $1,369,990 d. $1,084,394 e. $984,397
Lance, the rental property owner, made several repairs/replacements this year and must decide whether they should...
Lance, the rental property owner, made several repairs/replacements this year and must decide whether they should be depreciated. Which of the following conditions is not a determining factor in deciding when repairs and replacements should be depreciated? a) Increase the value of a property b) Make the property more useful c) Lengthen the life of the property d) Cost of the repair/replacement exceeds $2,500 Tom is a salesman who started using a home office on 01/01/2004. He claims depreciation expense...
2) If time has value, why are financial institutions often willing to extend you a 30-year...
2) If time has value, why are financial institutions often willing to extend you a 30-year mortgage at a lower annual interest rate than they would charge for a one-year loan? a) With a mortgage, the house you purchase acts as collateral for the loan. This reduces the risk associated with the loan and so reduces the compensation the bank requires. b) Because time has value, banks charge a lower interest rate on mortgages because they receive repayments for 30...
The rental value of an owner-occupied house is included in which component of GDP? Consumption Intermediate...
The rental value of an owner-occupied house is included in which component of GDP? Consumption Intermediate value Fixed investment None of the above Which of the following components of GDP is the largest for the US economy? Consumption Investment Government purchases Net exports
If the cap rate on a property is 8%, and you expect the property to appreciate...
If the cap rate on a property is 8%, and you expect the property to appreciate at 3% per year, approximately what discount rate (e.g., the expected unleveraged total return) should be applied to determine the market value in a multi-year DCF analysis? Group of answer choices 9% 11% 7% 5%
1) Depreciation computed under double−declining−balance will decrease each year because: A.the book value used in the...
1) Depreciation computed under double−declining−balance will decrease each year because: A.the book value used in the computation each year increases B.the rate used in the computation each year decreases C.the book value used in the computation each year decreases D.the rate used in the computation each year increases 2) At the end of an asset's useful life, the balance in Accumulated Depreciation will: A.be greater under units−of−production depreciation than under straight-line depreciation B. be a greater amount under straight-line depreciation...
Bob buys a property with an 80% LTV interest only mortgage at an annual rate of...
Bob buys a property with an 80% LTV interest only mortgage at an annual rate of 6%, with annual compounding and annual payments. Bob’s annual cap rate for the first year is 5%. Which of the following is true about Bob’s Return on Equity (ROE) for the first year? (A)         ROE is the same as it would have been if he didn’t use leverage (B)         There is not enough information to answer this question (C)         ROE is...
Commercial real estate prices and rental rates suffered substantial declines in 2008 and 2009.† These declines...
Commercial real estate prices and rental rates suffered substantial declines in 2008 and 2009.† These declines were particularly severe in Asia; annual lease rates in Tokyo, Hong Kong, and Singapore declined by 40% or more. Even with such large declines, annual lease rates in Asia were still higher than those in many cities in Europe. Annual lease rates for a sample of 30 commercial properties in an Asian city showed a mean of $1,118 per square meter with a standard...
Commercial real estate prices and rental rates suffered substantial declines in 2008 and 2009.† These declines...
Commercial real estate prices and rental rates suffered substantial declines in 2008 and 2009.† These declines were particularly severe in Asia; annual lease rates in Tokyo, Hong Kong, and Singapore declined by 40% or more. Even with such large declines, annual lease rates in Asia were still higher than those in many cities in Europe. Annual lease rates for a sample of 30 commercial properties in an Asian city showed a mean of $1,116 per square meter with a standard...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT