Real estate investing practice exam

Consideration

A deed states, "For love and affection, the receipt and sufficiency of which is hereby acknowledged." What does this statement represent in the deed?

Liquidation value

A lender requests an appraisal of a property under foreclosure. What type of value is the lender most likely to be interested in?

Transfer ownership before death and avoid probate

A living trust differs from a testamentary trust in that a living trust is established to convey property as well as to ______.

$40,000

A property is generating $100,000 in income and has expenses of $25,000. The investor pays $3,000 toward mortgage principal each year and $32,000 toward interest, plus another $4,000 in income taxes. What is the before-tax cash flow?

Any additional information based on negotiations and specific situations

All commercial leases should contain the conditions under which the lease can be terminated; the names and signatures of all parties; and ______.

Convert the rental property to condominium ownership

Anya, an owner of an older rental property, is ready to cash out. How would she realize the most profit?

Collecting rent

At the beginning of each month, Drew sits in front of his laptop with his spreadsheets and bank statements to ensure each tenant is paid up. He hates when the tenants are late, because then he has to go knocking on their doors, demanding payment. Which commercial property manager duty is Drew performing?

Having a survey conducted

Brandon is interested in purchasing a piece of property, but before doing so, he'd like to verify the accuracy of the legal description. Which of these options will accomplish this?

Financial risk

Brandy is going to purchase a strip mall. She is trying to determine exactly how much to borrow for this purchase. She understands that the more she borrows, the greater her risk. What type of risk is she evaluating?

Francine, the person most responsible for the property

Burlingame Property Management just started managing Juliann's apartment complex. Who should be Juliann's main contact?

Conduct a feasibility study

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?

Three to six mile

Deborah wants to invest in a community shopping center. What size trade area can she plan to service?

New liens can threaten the lender's position as primary lienholder. Default can occur for this reason.

How can liens, such as those created by non-payment of federal income tax, result in mortgage default?

Two or more

How many dwelling units does a multi-family residential property have?

Debt-to-Asset, 17%; Debt-to-Equity, 23%, Debt-to-Capital, 19%

If TVC has $450,000 in assets, $75,000 in debt, and $330,000 in equity, which of these ratios are correct?

Five to 20

In addition to the one major tenant, how many tenants does a neighborhood shopping center normally have?

Community property

In nine states, married couples who purchase property during the marriage own that property equally, meaning they own it as ______.

Collect all applicable electronic files

Jules just took over property management for a large apartment complex. What is one thing she should do immediately?

Lien

Private loan companies may place a ______ on the property for which the loan is being taken.

One third

Property taxes generate approximately ______ of local government revenue.

Deed in lieu

Rather than be foreclosed on, Jarod turned his deed over to his bank. This is called a ______.

A mutual

Rescission can be ______ agreement to cancel a contract.

Maintaining tenancy and profitability

Rona has given herself a challenge: No vacancy gaps allowed in the office building she manages. As she negotiates the lease agreements with each tenant, she does her best to stagger the lease end dates. Which office building property manager's duty is this?

The EPA can seek damages in court for up to three times the actual cleanup costs.

Sam and Monique knew that the old industrial site that they purchased needed some environmental cleanup, but they don't have the cash and put cleanup on hold. The EPA hired its own crew to deal with groundwater issues because of industrial solvents and billed Sam and Monique $164,000 when the job was complete. If Sam and Monique don't pay the bill, which one of the following could happen?

28%

Steven put down $10,000 toward a property's purchase price, financed the rest, and now has a cash flow of $2,800 after repairs and debt service. What's his ROI?

Freddie must intend to convey the property to Stu.

Stu is buying Freddie's property. What must occur for the transfer of title to take place?

15%

The IRS requires foreign property owners to withhold _____ of the gross purchase price when they sell real property they own in the U.S.

A percentage of market value and the value to which the tax rate is applied

The assessed value of a property is ______.

Regression

The houses in one neighborhood are all of similar sizes and style. When the Smiths' house goes into foreclosure, what principle will affect the value of the next-door neighbors' house if they sell at the same time?

Traffic patterns

The introduction of a development into an area can impact ____________, which, in turn, can have an effect on local businesses.

Sellers market

The market for real estate in Chad's area has experienced a sudden increase in demand, and there aren't enough homes to go around. It seems like a bidding war ensues for every available property. What's the condition of the real estate market in Chad's area?

What is maximum equity?

The maximum amount the borrower is willing/able to invest

Evicting tenants

This is the part of Eileen's job that she enjoys the least: Telling tenants they have to leave because they've failed to comply with the terms of their lease. Which commercial property manager duty is Eileen having to perform?

Special use

Under which of the following real estate submarkets would an investment in public storage facilities fall?

It's a commercial enterprise that's open to the public.

Virginia is finally living her dream—she bought a coffeehouse in a charming college town. After she closed on it, her attorney sat down with her to discuss various business licensing and legal requirements she'll have to meet. Virginia was surprised to learn that her five-table establishment is affected by the Americans with Disabilities Act. What must be true about the coffeehouse?

Resident managers

What are residential property managers who live on-site called?

Inventory rates

What market indicator is expressed as the number of months it takes to sell homes at the current rate of sales?

Hand over all financial information

What should property owner Solange do before handing over the reins to the new property manager, Gordon?

It combines pass-through taxation of partnerships with the limited liability of corporations.

What tax advantage does a limited liability company have?

591,825

What's the average gross leasable square feet for a regional shopping center?

Loan balance x interest rate ÷ number of payments annually

What's the formula used to calculate monthly simple interest on a loan?

Both an investment strategy and property type

When it comes to real estate investments, "commercial" is ______.

Competition

When prices go down because there are too many homes on the market and too few buyers, what economic principle is at work?

When the deceased owned property in another state

When would ancillary probate proceedings be required?

Title III

Which ADA title is concerned with the accessibility of public accommodations?

Equity

Which REIT type specializes in owning certain building types, such as apartments or office buildings?

Release

Which clause found in a promotional land sale agreement states that the property will be released from the underlying lien after the buyer has paid a certain percentage of the balance on the individual lot purchased?

Articles of incorporation

Which document is used to create a corporation?

Mortgage REIT

Which of the following Real Estate Investment Trusts focus on lending money for mortgages and investing in mortgage-backed securities?

Americans with disabilities act

Which of the following acts requires office buildings to be accessible to individuals with a disability, such as those who use wheelchairs?

Because lenders view condos as a slightly higher risk, they usually require a slightly higher down payment.

Which of the following statements about condominium financing is true?

Results are often reviewed and approved by a community board.

Which of the following statements about the EPA's environmental impact study is true?

Market change

Which of these is a dynamic risk?

They have a high compliance rate

Which one of the following characteristics makes property taxes a reliable target for taxation?

LLP

Which one of the following entities meets the definition of a business structure that has no general partners and whose owners have limited personal liability?

NCUA

Which organization manages and charters credit unions?

Maximum equity and maximum loan

Which two numbers do you add to calculate maximum price?

Ad valorum

Which type of property tax is based on the value of the property?

The full principal of the loan is due

With an interest-only loan, what happens after the specific period of time that interest-only payments are made is over?

$21,000

Yanni is an investor who has just purchased a building for $300,000. Similar buildings are returning a rate of 7%. What can Yanni anticipate his annual net operating income to be?