Chapter 4: Important Points Flashcards
IP Before investing, an investor must consider
The time value of money, that is, where his investment funds would bring the greatest return on dollars invested for a given time.
IP Operating statement for a property
Includes the income and expenses for a property. The costs of business or investment property are tax-deductible expenses.
IP Valuation of a property
Estimates the market value of an identified interest in a specific property as of a certain date. Types of value include market value, investment value, value in use assessed value and mortgage loan value.
IP Forms of property ownership include
Sole proprietorship, partnership, corporation, syndication and joint ventures.
IP Leverage
The use of borrowed funds, which allows the investor to accumulate the maximum amount of real estate with the minimum amount of personal funds.
IP Types of investment property include
Land, retail offices, offices, mixed developments, apartment rentals, and hotels and motels.
IP Analysis profile of a property includes
The analysis of risk and return, special risks, timing, pricing, rate of return, portfolio development and securitization, sensitivity analysis, and special financing.
IP Feasibility study
Generally is used when considering large-scale projects. It is a statistical analysis of all facets of the market, including a comparison of other similar projects.
IP Under the Taxpayer Relief Act of 1997
Single taxpayers may take up to a $250,000 exclusion from taxation on gain in the sale of their homes and married taxpayers may take up to a $500,000 exclusion.
IP Capital Gain
The profit realized from real estate investment. Capital Loss occurs when an investment is sold at a loss. The adjusted basis of a property is the cost of the investment combined with the cost of improvements.
IP Depreciation
A deductible allowance from net income in arriving at taxable income. It provides a tax shelter for the property owner.
IP What does depreciation enable?
The owner of the business or investment property to recover cost or other basis of the asset. Land is not depreciable - only structures on the land.
IP Cash flow
Represents the net proceeds after all expenses are met and can be measured before or after taxes are considered.
IP Tax Losses from investment property
Are allowed to offset income only from passive activities
IP These are income shelters for investors
Deductible allowances from net income of property to arrive at taxable income and tax losses allowed to offset passive and active income.
