Settlement, Prorations, Investments 14 Flashcards Preview

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Flashcards in Settlement, Prorations, Investments 14 Deck (48)
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1

Income Remaining After the Operating Expenses (Deducted From) Effective Gross Income.

Net Operating Income -

Income Remaining After Operating Expenses  (Deducted From) Effective Gross Income.

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2

Detailed Accounting Prepared by Escrow, shows:

  1. Cashed Received
  2. All Charges Debit/Credit

Closing Statement

Detailed Accounting Prepared by Escrow shows:

  1. Cashed Received
  2. All Charges Debit/Credit

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3

Proportional Division or Distribution of Funds (30 Days Used)

Prorations -

Proportional Division or Distribution of Funds (by 30 dys used)

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4

Owner pays in Arrears - Debit or Credit?

  1. Real Estate Taxes (Arrears) - Seller ___ Buyer ____
  2. Interest on Loans (Arrears) - Seller ___ Buyer ____
  3. Water Bills (Arrears) - Seller ____ Buyer ____

Arrears - Means overdue payment

Owner pays in Arrears: (Debit Seller)

Seller Debit / Buyer Credit

  1. Real Estate Taxes (Arrears) - Seller Debit / Buyer Credit
  2. Interest on Loans (Arrears) - Seller Debit / Buyer Credit
  3. Water Bills (Arrears) - Seller Debit / Buyer Credit

Arrears - Means overdue payment

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5

Owner pays in Advance

  1. Pre-paid Taxes (Advance) - Seller ____ / Buyer _____
  2. Insurance Premiums (Advance) - Seller ____ / Buyer ____
  3. HOA (Advance) - Seller ______ / Buyer _____
  4. Propane (Advance) - Seller ______ / Buyer ______

Owners pays in Advance: (Seller Credit)

  1. Pre-paid Taxes (Advance) - Seller Credit / Buyer Debit
  2. Insurance Premiums (Advance) - Seller Credit / Buyer Debit
  3. HOA (Advance) - Seller Credit / Buyer Debit
  4. Propane (Advance) - Seller Credit / Buyer Debit

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6

Rental Properties:

  1. Prorated Rent - Seller ____ / Buyer _____
  2. Security Deposits - Seller _____ / Buyer _____

Rental Properties:

  1. Prorated Rent - (Seller Debit / Buyer Credit)
  2. Security Deposit (Seller Debit /Buyer Credit)

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7

Closing Cost: credit/debit to who (soley)?

  1. Loan Origination FeeBuyer ______
  2. ALTA Title Insurance - Buyer _____
  3. Owner Policy - Seller _____
  4. Commission - Seller ______
  5. Escrow Fee - Seller _____/ Buyer _____

Closing Cost (debit/credit):

  1. Loan Origination - Buyer Debit
  2. ALTA Title Insurance - Buyer Debit
  3. Owner Policy - Seller Debit
  4. Commissions - Seller Debit
  5. Escrow Fee (Seller/Buyer Debits)

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8

"Solely Credited" to Buyer and not shown on seller's side

  1. E____ Money - Buyer Credit
  2. N___ L___ - Buyer Credit

"Solely Credited" to Buyer and not shown on seller's side

  1. *Earnest Money: Buyer Credit
  2. *New Loan: Buyer Credit

9

All Closing Cost as - Seller Debit and Buyer Credit

  1. Seller C___b____: (Seller Debit / Buyer Credit)
  2. R___ C_____: (Seller Debit / Buyer Credit)
  3. Sec____ Dep____: (Seller Debit / Buyer Credit)
  4. T____ (Arrears): (Seller Debit / Buyer Credit)
  5. W____ (Arrears): (Seller Debit / Buyer Credit)

Seller Carryback - aka Purchase Money Loan. Seller becomes the Lender; Buyer the borrower. Used as loan to borrower for downpayment.

All Closing Cost as - Seller Debit and Buyer Credit

  1. Seller Carryback: (Seller Debit / Buyer Credit)
  2. Rent Collected: (Seller Debit / Buyer Credit)
  3. Security Deposit: (Seller Debit / Buyer Credit)
  4. Taxes (Arrears): (Seller Debit / Buyer Credit)
  5. Water (Arrears): (Seller Debit / Buyer Credit)

Seller Carryback - aka Purchase Money Loan. Seller becomes the Lender; Buyer the borrower. Used as loan to borrower for downpayment.

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10

Closing Cost - Soley - Seller Debits

  1. **Com_____- Seller Debit
  2. **O____ T___ P____ - Seller Debit

All Closing Cost (Debit/Credit)

  1. **Commission: Debit Seller
  2. **Owner Title Policy: Debit Seller

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11

Projected Rent if Property is 100% Occupied is called?

  • Contract Rent + Market Rent (Vacancies)

Gross Scheduled Income (Annual):

Projected Rent if Property is 100% occupied.

Contract Rent + Mkt Rent (Vacancies)

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12

Units not rented are called?

Vacancies -

Units not rented

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13

Rent which was owed by a tenant but not collected is?

Credit Losses -

Rent which was owed by a tenant but not collected

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14

Actual Income Received After Deducting Vacancies and Credit Losses from the Gross Scheduled Income

  • Gross Schedule Income
  • - Vacancies
  • - Credit losses
  • =

 

Effective Gross Income -

Actual Income Received After Deducting Vacancies and Credit Losses from the Gross Scheduled Income

  • Gross Schedule Income
  • - Vacancies
  • - Credit losses
  • =  Effective Gross Income

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15

Income Props Operate Expenses - Not Mortgage (PI) /Depreciation:

  1. Pr___ Mgmt F___
  2. Rep____
  3. Main_____
  4. Ut______
  5. T___ and In______
  6. Ad_______

Inc Props Oper Expenses - Not Mortgage (PI)/Depreciation:

  1. Prop Mg Fee 4. Utilities
  2. Repairs          5. Tax/Ins
  3. Maintenance 6. Ads

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16

The Principal and Interest Payments on the Loan.

Debt Service -

The Principal and Interest Payments on the Loan.

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17

Amount Left after Operating Expenses and Debt Service Paid; Before Income Taxes. Formula:

  • Gross Schedule Income
  • - Vacancy and Credit Losses
  • = Effective Gross Income
  • Effective Gross Income - Operating Expenses
  • = Net Operating Income (NOI)
  • Net Operating Income - Debt Service (PI)
  • = What?  (Before Income Taxes)

Cash Flow (Before Income Taxes) -    

Amount Left after Operating Expenses and Debt Service Paid and Before Income Taxes

  • Gross Schedule Income (Proj Rents 100%)
  • - Vacancy (@ Market) and Credit Losses
  • = Effective Gross Income
  • Effective Gross Income - Operating Expenses
  • = Net Operating Income (NOI)
  • Net Operating Income - Debt Service (PI)
  • Cash Flow (Before Income Taxes)

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18

Income from Salaries, Wages, Commissions, and Interest.

Ordinary Income -

Income from Salaries, Wages, Commissions, and Interest.

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19

Income Realized from the Sale of an Asset as a Profit.

  1. Short Term - Asset - L___ than _ Year
  2. Long Term - Asset - M___ than _ Year

Capital Gain Income -

Income Realized from the Sale of an Asset as a Profit.

  1. Short Term - Asset - 1 Year or Less
  2. Long Term - Asset - More than 1 year

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20

Income "Taxed" from an Entity like LLC at Level of Individual (not at level of entity).

 

Pass-through Income -

Income "Taxed" from an Entity like LLC at Level of Individual (not at level of entity).

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21

Tax Deductions - for SFR Own Occupied/2nd Homes.

  1. Real Estate Property Taxes/Other Taxes - Upto to $_______ Max Deduction
  2. Interest on Loans - Upto $_______ for Purchase and Improvements
  3. Home Equity Loan (Interest) - Is N__ D______.

Tax Deductions = Property Taxes and Loan Interest

Tax Deductions - for SFR Own Occupied/2nd Homes -

  1. Real Estate Property Taxes/Other Taxes - Upto $10,000 Max Deduction
  2. Interest on Loans Upto $750,000 - for Purchase and Improvements
  3. Home Equity Loan (Interest) - Is Not Deductible.

Tax Deductions = Property Taxes and Loan Interest

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22

Same Amount Recovery Deductions on Investments Every Year is called?

Straight Line Depreciation -

Same Amount Recovery Deductions on Investments Every Year

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23

Capital Gain Excluded Amts -

Personal Residence SaleCapital Gains Excluded from Taxes

  1. Single - $_____ Gain Excluded
  2. Married - $_____ Gain Excluded
  3. Must be Owner Occupied - __yrs/In past __yrs.

Capital Gain (Excluded Amts) -

Personal Residence Sale - Capital Gains Excluded from Taxes:

  1. Single - $250,000 Gain Excluded
  2. Married  $500,000 Gain Excluded
  3. Must be Owner Occupied - 2 yrs/In past 5yrs.

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24

1031 Exchanges - Allows "Tax On Gain" to be Deferred into Future.

  1. Like Kind - In____ and Inv______ Properties.
  2. Simultaneous Exchange - One Property "T____ Dir____ for A_____ Property
  3. Delayed Exchange - New Pro____ Ac____ within Specific Time Frames.
  4. Boot - Un____ K___ Pr_____ Received in an Exchange.

1031 Exchanges - Allows "Tax On Gain" to be Deferred into Future.

  1. Like Kind - Income/Investment Properties.
  2. Simultaneous Exchange - One Property "Traded Directly for Another Property
  3. Delayed Exchange - "New Property Acquired" within Specific Time Frames.
  4. Boot - "Unlike Kind Property" Received in an Exchange.

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25

FIRPTA Foreign Investment In Real Property Tax Act

  1. Federal Law which Non-R_____ Al___ Must Pay US Income T__ G___ from the S___ of US Real Property.
  2. Escrow holds __% of Sales Price.
  3. Buyer Could Be Liable - for S___'s T__,  if Not Withheld.

FIRPTA Foreign Investment In Real Property Tax Act

  1. Federal Law which Non-Residential Aliens must pay US Income Tax Gain from the Sale of US Real Property.
  2. Escrow holds 15% of Sales Price.
  3. Buyer Could Be Liable - for Seller's Tax,  if Not Withheld.

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26

Investment Property - Tax Deductions -

  1. O______ Expenses (Prop Mg Fee, Repairs, Maint, Utilities, Ads, Tax/Ins)
  2. Int____ on Loans
  3. Cost Recovery (Depreciation):
  • Residential (Income) Property - ___ Yrs
  • Non-Residential Property - ___ Yrs
  • Land/Personal SFR - No Dep_____
  1. Straight Line Depreciation: Same Amt of  "Depreciation" Every Year

Investment Property -Tax Deductions -

  1. Operating Expenses (Prop Mg Fee, Repairs, Maint, Utilities, Ads, Tax/Ins)
  2. Interest on Loans
  3. Cost Recovery (Depreciation):
  • Residential Income Property - 27.5 Yrs -
  • Non-Residential Property - 39 Yrs
  • Land/Personal SFR - No Depreciation
  1. Straight Line Depreciation: Same amount of  "Depreciation" Every Year

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27

Allows "Tax Gain" to be Deferred in Future Years.

1031 Exchanges:

Allows Tax Gain to be Deferred in Future Years.

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28

Properties held for "Income or Investment" in an Exchange?

Like Kind -

Properties held for "Income or Investment" in an Exchange.

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29

Closing Cost: Credit/Debit to one side only?

  1. Loan Origination Fee -  Buyer ______
  2. ALTA Title Insurance - Buyer _____
  3. Owner Policy - Seller _____
  4. Escrow Fee - Seller _____/ Buyer _____

Closing Cost Credit/Debit to one side only?

  1. Loan Origination (Buyer Debit)
  2. ALTA (Buyer Debit)
  3. Owner Policy (Seller Debit)
  4. Escrow Fee (Seller/Buyer Debits)

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30

If an Item Reduces the Cash the Buyer Must Bring to Closing, it is a Buyer (Credit or Debit)?

Buyer Credit -

If an Item Reduces the Cash the Buyer Must Bring to Closing, it is a Buyer Credit

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