Chapter 22

Question 0

How quickly an asset may be converted into cash

Answer 0

Liquidity

Question 1

The use of borrowed money money to finance an investment

Answer 1

Leverage

Question 2

The total amount of money remaining after all expidentures have been paid

Answer 2

Cash flow

Question 3

The amount of rental income the property could produce with 100% occupancy and all tenants paying full rent; also called potential gross income

Answer 3

Scheduled gross income

Question 4

To determine this the debt service on the mortgage loan would be subtracted from the property’s net operating income

Answer 4

Before tax clash flow/ cash throw off

Question 5

Profit and loss statement is also called ____

Answer 5

Operating statement

Question 6

Separate legal entity that can own and sell real estate in its own name.

Answer 6

Corporation

Question 7

Offers the legal insulation of the corp. and the flexibility of the partnership in a relatively simple business entity

Answer 7

Limited liability company

Question 8

The co-workers share everything equally and operate as agents of the partnership

Answer 8

General partnership

Question 9

There are general partners that control and operate the business while this kind of patterns are silent and only provide capital for investment

Answer 9

Limited partnership

Question 10

A business venture in which people pool their resources to own or develop a particular piece of property

Answer 10

Real estate investment Syndicate

Question 11

Doesn’t pay corp. income tax as long as 95% of its income is distributed to its shareholders and other conditions are met.

Answer 11

Real estate investment trust

Question 12

An increase in the worth of value of a property due to economic or related causes which may prove to be either temporary or permanent; opposite of depreciation

Answer 12

Appreciation

Question 13

Derived by diving the before tax cash flow by the owner’s cash investment ; equity divided rate

Answer 13

Cash on cash rate of return

Question 14

The anticipated income from a rental property resulting from potential gross income minus allowance for vacancy and bad debts

Answer 14

Effective gross income

Question 15

The portion of the loan payment directed toward the principal rather than the interest plus any gain in the property value due to appreciation

Answer 15

Equity buildup

Question 16

The gradual reduction of the purchasing power of the dollar usually related directly to the increases in the money supply by the federal government

Answer 16

Inflation

Question 17

An annual percentage derived from dividing cash invested into the net after tax income

Answer 17

Return on investment