Real Estate Investment Flashcards
(120 cards)
1
Q
Two areas of vulnerability for the lender occur when homeowners insurance is allowed to lapse. What are they?
A
Property damage and judgment liens.
2
Q
Tax credits for low-income housing are available to _______.
A
Developers and investors.
3
Q
Which payment plan consists of the borrower paying a constant amount made up of principal and interest on a periodic basis (usually monthly)?
A
Fully amortized loan payment plan.
4
Q
How is a mortgage banker paid?
A
Fees from originating and servicing loans.
5
Q
Which REIT type specializes in owning certain building types, such as apartments or office buildings?
A
Equity.
6
Q
Which of these terms can be defined as what a buyer has paid for a property and what the seller has accepted?
A
Price.
7
Q
Which of the following involves street specifications, lot size, single- or multi-family dwellings, utilities provided and easements, how far houses must be set back from property lines, and drainage requirements?
A
Subdivision regulations.
8
Q
Which of the following best defines capitalization rate?
A
The expected rate of return on investment.
9
Q
Melanie manages the records in her brokerage office. Which of the following is vital to Melanie with regards to record management?
A
A secure storage area for storing records.
10
Q
What exemption to the “every two years” rule concerning the capital gains exclusion allows a seller to claim a partial exclusion when the seller is forced to sell early?
A
Involuntary conversion.
11
Q
Seller Gina feels awful that Martha, who was going to buy her property, lost her job. Gina decides to ______ Martha from the purchase contract.
A
Release.
12
Q
Who’s responsible for finding ways to draw consumers back to the community shopping center on a regular basis?
A
On-site property manager.
13
Q
After spending three years gutting and renovating her 1925 American Foursquare into a local showplace, Evette buys another rundown property on her street as an investment. Given her experience, which of the following strategies is her most likely choice?
A
Fix and flip.
14
Q
Which of the following is true about the GRM method?
A
The method can’t be used alone as an indication of value for residential property.
15
Q
If David, a landowner, isn’t ready to sell his land, ______ can provide him with an income stream.
A
Leasing to a long-term tenant.
16
Q
A grantor retained income trust is a type of trust that allows what?
A
The grantor to receive income.
17
Q
”Separate property” is property most likely acquired ______.
A
Prior to marriage.
18
Q
Property manager Alexandra wants to ensure she gets everything she needs from the property owner when she begins to manage the property. What’s the best way to do this?
A
Use a takeover checklist.
19
Q
Victims of fair housing discrimination can seek redress in federal court. Within how many years of the alleged violation do they have to do so?
A
Two years.
20
Q
What type of deed are you likely to receive if you purchase a property with cash at a foreclosure auction?
A
Referee’s deed.
21
Q
Why might a person opt to be a general partner rather than a limited partner in a real estate venture?
A
Hands-on management.
22
Q
In the early 2000s, before the 2007 financial crisis, how would you characterize the real estate market?
A
Low interest rates and high property values.
23
Q
What happens at the end of the term established for a grantor retained income trust?
A
It vests to the beneficiary.
24
Q
Which type of store is usually the major tenant for a neighborhood shopping center?
A
Supermarket.
25
What penalties may a person who is found guilty of falsely filing a fair housing complaint receive?
A sentence of up to five years’ imprisonment or a $10,000 fine.
26
Which of the following investors is exempt from fair housing laws?
An investor who owns fewer than three single-family homes.
27
To compute a monthly principal and interest payment, which of the following pieces of information do you need to know?
Mortgage loan value, annual percentage rate, loan term, and payment frequency.
28
What type of value may consumers be interested in if they are looking for the potential rate of return?
Investment value.
29
In the months before the financial crisis beginning in 2007, what made collateralized debt obligations (CDOs) such an attractive investment?
Increasing home prices gave them the perception of a safe, high-yield investment.
30
Tom believes he is the victim of discrimination at the hands of his real estate agent. How long does he have to file a complaint?
One year.
31
Henry dies, and his property is not held in a trust. Thus, his estate will go through probate to ensure his property is distributed to his heirs in accordance with his will. The probate process often takes ______ before the property is distributed to the heirs of the deceased.
A year or more.
32
A property valued at $1 million is returning a net annual income of $85,000. What's its cap rate?
8.5%.
33
Which document is used to create a corporation?
Articles of incorporation.
34
Which of the following single-lot properties have a greater potential for being rezoned?
Lots located near open space.
35
Which of the following scenarios is an example of corrective maintenance that may be overseen by a property manager?
Replacing a section of roof after a leak.
36
Harvey is an investor who found and closed on an investment property, then decided to sell a property other than the one originally marked for the exchange. What is this an example of?
A reverse tax-deferred exchange.
37
Property A is in a highly appreciating area. Property B was assessed identically to Property A five years ago but has lost value. Without periodic reassessments, which of the following is true?
Property A and B would pay the same property taxes.
38
Bridget has an investment portfolio that includes an equity REIT. Which of these is most likely to be part of the REIT’s investment?
Retail shopping centers.
39
Carlton, an owner of several retail spaces and one apartment building, is ready to sell his investments. He thinks the most lucrative approach would be to change his current properties into condominiums. What is this investment opportunity known as?
Conversion.
40
Economic, tax, and market changes are types of _______ risk.
Dynamic.
41
How many anchor stores does a super-regional shopping center normally have?
Three or more.
42
Which of the following statements is true about the effect that e-commerce is having on commercial property investments?
Factory outlets, big-box shopping centers, and shopping malls have all been hit hard.
43
Billie is a residential property manager. Her primary obligation is to _______.
The building owner.
44
Jared wants to purchase property. One of the properties he is interested in was formerly zoned for commercial use. It has a steep drop-off at the back of the property, as well as some soft spots and mounds. Does this matter?
Yes, these are clues that the property may have been used as a waste disposal site.
45
The direct capitalization method would be a good choice of appraisal method in which of the following situations?
An apartment building that has consistent income and expenses year after year.
46
Under a sole proprietorship form of business, ______.
The owner assumes personal liability for all debts
47
A deed states, “For love and affection, the receipt and sufficiency of which is hereby acknowledged.” What does this statement represent in the deed?
Consideration.
48
Which of these principles of value is related to how a change to a portion of a property impacts the value as a whole?
Contribution.
49
Chadwick is a developer considering purchasing a large piece of unimproved land for a subdivision development. What should he do before committing to the project?
Conduct a feasibility study.
50
Which of the following statements about an office condo owner’s responsibilities is true?
The owner is responsible for paying the PITI.
51
Why do investors have a special interest in the impact income taxes have?
Income tax is a significant factor in return on investment.
52
Leases may be terminated by expiration, eviction, or ______.
Mutual agreement.
53
Rather than be foreclosed on, Jarod turned his deed over to his bank. This is called a ______.
Deed in lieu.
54
Which of the following Real Estate Investment Trusts focus on lending money for mortgages and investing in mortgage-backed securities?
Mortgage REIT.
55
Roger is interested in converting his office building into office condominiums. He’s had the building renovated, and filed the appropriate paperwork. What else does Roger need to do as part of the conversion process?
Promote the sale of the condominium offices.
56
Which type of real estate property can be divided into classes A, B, and C?
Office buildings.
57
The introduction of a development into an area can impact ____________, which, in turn, can have an effect on local businesses.
Traffic patterns.
58
Zander, a relatively inexperienced residential property manager, has decided to rent an apartment to his friend, Melissa, without a written lease. Melissa has a history of not paying her rent. Which of the following issues may Zander face because there is no signed lease agreement?
Zander may have difficulty evicting Melissa for breach of contract.
59
Which of the following is a true statement about deducting interest on mortgages taken out in tax years between 2018 and 2025?
Interest on the first $750,000 of mortgage debt is deductible for married couples filing jointly or $375,000 for married couples filing separately.
60
Kali invested in a large plot of land and planned to build a beautiful new subdivision. Imagine her dismay when a very large and vocal group from town picketed her site. What did Kali fail to do before she invested?
Verify that there was local support for the development.
61
What is the purpose of a property management agreement?
To define the services a property manager will provide the owner and how much the property manager will be paid.
62
The trend toward _____ is largely a result of health-related concerns, as well as environmental and energy conservation demands.
Greener buyers.
63
Which of the following is a typical duty of a property manager?
Screening tenants.
64
Which of the following analyzes net operating income (NOI) for a single year, and is used when the property’s income isn’t expected to vary much over time?
Direct capitalization.
65
Which of the following statements about regional shopping center property managers is true?
There is at least one full-time property manager on-site at all times during shopping hours.
Because of the many responsibilities involved, regional shopping center owners employ at least one full-time property manager, who is on-site at all times during shopping hours.
66
Jenny and Sam are engaged to be married. Any real estate either owns at the time of marriage will remain that person’s property in severalty, while any property attained after the wedding belongs to both of them equally. The latter describes what type of ownership?
Community property.
Keep in mind that community property is based on the idea that each partner has an equal interest in the property.
67
What's another term for deed in lieu of foreclosure?
Voluntary conveyance.
In lieu of foreclosure, some lenders will allow a borrower to voluntarily convey the property to the lender.
68
A community and neighborhood market analysis should take into consideration the ________________ and whether it’s sufficient enough to support the proposed development.
Infrastructure.
69
In what type of lease does the landlord pay taxes, maintenance, and insurance?
Gross lease.
70
Which of the following statements about commercial residential properties is true?
A commercial residential property is a multi-family residential property.
A commercial residential property is a multi-family residential property with five or more dwelling units.
71
Keenan signed a lease agreement that contains a right of first refusal. What does this clause do for Keenan and his landlord?
It gives Keenan the option to buy the property he's leasing before the property is sold to someone else.
72
Upon which of the following are rental rates normally based?
Each office’s interior usable square footage.
Most office rents are based on each office’s interior usable square footage.
73
What should new property manager Addie do to make sure she gets all the information she needs from the owner and completes the tasks she needs to complete?
She needs to use a takeover checklist.
74
A landlord locks a tenant out and requires the tenant to pay past-due rent before regaining access to the unit. This is considered ______.
Illegal.
75
As supply increases, what happens to price?
Decreases.
76
Which of the following is a percentage of market value, and is also the amount of property value to which the tax rate is applied?
Assessed value.
77
Which of the following is considered to be one of the essential elements of a contract?
Legal purpose or lawful objective.
78
Which of the following conditions contributed to the 2007 financial crisis?
Rising interest rates and falling property values.
As 2007 approached, interest rates were rising, especially on adjustable rate mortgages that many subprime borrowers were holding. This and falling property values were contributing factors to the crisis.
79
Tim is the property manager for a neighborhood shopping center. With how many major tenants does he have a lease agreement?
One.
80
Carla creates a trust to convey her assets to her children. Her brother, Alvin, is placed in charge of making sure the terms of the trust are carried out. In this example, Carla is the ______.
Trustor.
81
Which statement best describes the construction of strip malls?
Long, rectangular shapes.
82
______ occurs when the parties can't legally or practically do what they’ve agreed upon due to circumstances beyond their control.
Impossibility of performance.
83
Which of the following is the term used for the authorization for how tax funds are spent and collected?
Appropriation.
Although all of these terms are related to taxation, the term you are looking for that has to do with how tax money is spent and collected is "appropriation."
84
Taxes are often expressed in mill rates. What is a mill rate?
1/10 of a cent.
Think of "mill" as a thousand. One cent is 1/100 of a dollar, and a mill rate is 1/10 of a cent (100 x 10 = 1,000).
85
In a transfer of ownership in real property, who conveys the title?
Grantor.
The grantor (usually the seller) conveys title. The grantee (buyer) accepts and acknowledges receipt of title.
86
Which of the following is true about foreign real estate buyers?
They tend to purchase more expensive real estate than domestic buyers.
87
When a tenant reports an issue, Malik knows the best policy is to ______.
Respond right away.
88
Connie is a real estate investor who owns an apartment building. She adds the rental income received from her tenants to other income from the coin-operated laundry and parking garages. The sum is her ________.
Gross income.
89
Office buildings can be divided into three classes: Class A, Class B, and Class C. What are the ratings associated with these classes?
Prestigious, fair to good, functional.
Office buildings can be divided into a Class A office building, which is prestigious, a Class B, which is fair to good, or a Class C, which is functional with below-average rent.
90
Morgan is a single taxpayer and a real estate investor. She buys homes for cheap, fixes them up while living in them, and sells them for a profit. How much is she allowed to exclude if she realizes a gain from the sale of her current property (assuming she meets all the criteria to exclude the gain)?
$250,000.
91
Kenny wants to include a clause in his commercial lease that will allow him to decide if he’ll continue the lease agreement with the owner or not. What type of clause is this?
Option to renew.
If there’s a renewal option in the lease agreement, the investor/landlord is agreeing to give up control of the property for the term of the lease as well as for the potential renewal period (also known as the option period).
92
What's it called when the condominium association has the right to purchase a unit when it goes up for sale before that unit is marketed to the public?
Right of first refusal.
93
An investor is going to have a long holding period for a large tract of rural land. Which of these options may be appealing to the investor?
Lease the land to a tenant farmer on a profit-sharing basis.
94
Keith, a property manager, has just signed a management contract with property owner Tanya. What is the nature of the relationship that has been created?
An agency relationship.
95
Over how many years is a residential income-producing property depreciated?
27.5 years.
96
What are vacancy rates, new building permits, inventory rates, and sales volume?
Market indicators.
97
An investment strategy that focuses on looking for smaller multi-family properties, fixing them up, and renting them out describes which of the following?
Buy and hold.
98
Why do lenders care so much about property condition?
The property is collateral for the mortgage.
99
Investors can stay on top of trends in the market by maintaining a relationship with local appraisers as well as with ______.
Apartment and commercial real estate lenders.
Professionals who handle real estate transactions every day will be the best sources of trends in the local real estate market.
100
Real estate investors rely on the principle of ___________ when calculating the current value of the total anticipated future benefits of an income property.
Anticipation.
101
A promissory note is considered a ________.
Negotiable instrument.
A promissory note is considered to be a negotiable instrument. This means that the holder may transfer the right to receive payments to a third party, and that third party may enforce the promissory note and the other loan documents.
102
An investor purchases a Class B office building in a midsize, Midwestern city, and a similar office building in another midsize, Midwestern city. Should the investor expect both properties to perform in a similar fashion?
No, because the different locations can have different performances no matter how similar the properties.
There’s no such thing as a standard product in real estate, so even very similar properties in the same city--and certainly different cities--can have characteristics that cause performance variation.
103
Jared's office keeps records, such as the number of daily leads an agent generates. Which important justification for record keeping is Jared practicing?
Decision-making.
This data can help you determine what you are doing right and what needs to be changed.
104
What’s the name for a capitalization method which converts a single year’s expected income into a market value?
Direct capitalization.
105
Land that can be separated from a larger piece of land and sold separately without harming the ability to develop the original parcel is called _______.
Excess land.
This is the definition of excess land, which should be valued separately in an appraisal.
106
With which type of commercial lease does the tenant pay some or all of the expenses?
Net lease.
107
Immediately before the financial crisis of 2007, what factor made banks eager to sell as many mortgages as possible, even to consumers without the ability to repay the loan?
A ready secondary market for subprime loans.
108
How does the income from property taxes benefit the community?
It's used to fund essential services and public works.
109
If helping the owner achieve the highest possible net profit is a property manager’s primary responsibility, what important information does the property manager need to know?
What kind of return the owner needs on the investment.
110
When Curtis writes his rental agreements, his goal is to ______.
Be as specific as possible.
111
You make an investment with other real estate investors. Because of the profit-oriented nature, and the fact that the profit depends solely on the management effort of others, this is likely what?
A security.
Some syndicates are said to be dealing in securities due to the profit-oriented nature, and due to the fact that the profit is dependent on others' management efforts.
112
Which of the following is true about investors and tax depreciation?
Investors can depreciate an appreciating asset.
Depreciation of investment properties allows investors to depreciate an appreciating asset and use the depreciation as a business deduction; depreciation is limited to investment properties. Improvements can be depreciated; land itself can not.
113
In order for a deed to be valid, which two elements are required?
Signature of the grantor and consideration.
114
Which of the following is one of the four key federal government controls that can potentially affect development and investment projects?
FHA approval for subdivisions that plan to allow FHA financing.
115
A ______ investor is known for buying land and holding it in inventory.
Land banker.
116
Raj wants to calculate the gross annual rental income for his office building. The productive square footage is 50,000 and the rental rate is $35 per square foot. What is the gross annual rental income for this property?
$1.75 million.
117
Your client, Brian, is an investor who likes to put as little cash down on his investments as possible. Brian believes in the power of ______.
Leverage.
Leverage means using other people's money to finance investments.
118
What's a fee simple estate?
One that conveys the broadest form of ownership.
119
Your investor client, Kent, is in the process of selling a four-plex, and mentions to you that he hates the idea of the capital gains tax he'll be subject to. You tell him...
"You might consider a 1031 tax-deferred exchange."
120
If a contract contains all the essential elements of a legal agreement, it is _______ contract.
A valid.
