Certified Residential Appraiser Practice Exam

What does the reversionary benefit represent for an investor?

1. Income from rental during the lease

2. Proceeds from the sale after the lease ends

3. Tax benefits from property ownership

4. Appreciation of property value

The correct answer is: Proceeds from the sale after the lease ends

The reversionary benefit pertains to the potential gain that an investor can expect to receive once a lease period concludes. It represents the value of the property once the current lease obligations are fulfilled, allowing the owner to regain possession of the asset and potentially sell it at a higher price than what they originally paid or capitalized on any value appreciation. When an investor leases a property, especially in a long-term lease scenario, they may not have immediate access to the property for income generation or sale. However, after the lease ends, the investor can capture the reversionary benefit, which is fundamentally the potential sale proceeds or the ability to reinstate income generation through leasing the property again at current market rates. This makes it an important factor in the overall return on investment calculation. This understanding contrasts with other options, which focus on different aspects of property investment rewards, but they do not encapsulate the essence of reversionary benefits that emphasize the potential gains at the termination of a lease.