Certified Residential Appraiser Practice Exam

What term describes the capital structure comprised of debt and equity in real estate investment analysis?

1. Yield Rate

2. Discount Rate

3. Overall Yield Rate

4. Fixed Expenses

The correct answer is: Overall Yield Rate

The term that accurately describes the capital structure comprised of debt and equity in real estate investment analysis is known as the Overall Yield Rate. This term refers to the total return expected from an investment, taking into account both the income produced by the property (like rent) and the appreciation of the property value. In real estate, the Overall Yield Rate reflects the combined effect of financing (debt) and the investor's own capital (equity). This is important because it helps investors gauge the efficiency and performance of their investment while factoring in various sources of capital. Other terms in the question, such as Yield Rate and Discount Rate, have more specific meanings related to returns on equity or income calculations and do not encapsulate the entire capital structure as the Overall Yield Rate does. Fixed Expenses refers to costs that do not change over time, related more to operational expenses rather than returns on investment. Thus, Overall Yield Rate is the most comprehensive and appropriate term for describing the combination of debt and equity in this context.