Overview, risk Flashcards
(9 cards)
1
Q
What are the 5 kinds of real estate investments?
A
- residential
- commercial
- industrial
- agricultural
- business opportunities
2
Q
What are the advantages of real estate as an investment? (5)
A
- above-average rate of return
- tax advantages
- hedge against inflation
- leverage of borrowed money
- equity buildup
3
Q
What are the disadvantages of investing in real estate? (5)
A
- lack of liquidity (illiquid)
- more localized market
- expenses associated with expertise
- need for active management
- relatively high degree of risk
4
Q
What is business risk?
A
The degree of variance between budgeted income and expenses and actual income and expenses.
5
Q
What is financial risk?
A
The ability of a property to pay operating expenses from operations, borrowing, and equity.
6
Q
What is purchasing-power risk?
A
Related to inflation.
7
Q
What is interest-rate risk?
A
The risk of rising interest rates.
8
Q
What is liquidity risk?
A
The possible loss that may be incurred if the investment has to be converted quickly into cash.
9
Q
What is safety risk?
A
Market risk + risk of default.
