Chapter 11 Real Estate and Other Investments
What are hybrid Real Estate Investment Trusts?
A Real Estate Investment Trust that combines the strategies of both equity REITs and mortgage REITs by purchasing properties and making loans to real estate owners and operators.
How does a Limited Partnership work?
A general partner, who takes complete responsibility for all of the partnership's liabilities, forms the partnership. The general partner then sells participation units, or shares, to a number of limited partner, or investors.
Generally, an indirect investment in real estate is
A hedge against inflation
What must an investor do to make a profit from investing in precious metals?
An investor must store the metals in a safe place that will ensure the metals stay in mint condition so that they do not lose their value. Investors must also study the world economy very closely so that they can make more accurate predictions about when the prices of precious metals will either rise or fall.
Why are participation certificates risk-free real estate investments?
Because they are backed by government agencies and their security works much like U.S. Treasury bonds and notes.
Rare coins, books, stamps, paintings, other such items are known as
Collectibles
Land or property that produces lease or rental income is a
Commercial Property
The price of gold may fall when
Countries make peace
The owner holds legal title to the property they purchased in a
Direct Investment
What are the 4 regulations the federal government requires REIT's to follow?
Distribute at least 95% of their net annual earnings to shareholders: Avoid investing in risky, short-term real estate holdings in the hope of selling them for quick profits; Hire independent real estate professionals to carry out certain management activities; Have at least 100 shareholders, with no more than half the shares owned by five or fewer people.
An investment in a real estate syndicate can be
Diversified
REIT's might invest the participant's money in any of the following except
Financial Instruments
The uses of borrowed funds for investment purposes is called
Financial Leverage
In a syndicate organized as a limited partnership, responsibility for all the partnership's liabilities belongs to the
General Partner
An example of a direct investment is a
Home Mortgage
A trustee is appointed to hold legal title to property on behalf of an investor or group of investors in an
Indirect Investment
A _______ is liable only for the amount of their investment in business.
Limited Partner
Which of the following are examples of participation certificates
Mae's and Mac's
An investment in a group of mortgages that have been purchased by a government agency is a
Participation Certificate
Rough mineral deposits from the earth and that jewelers cut into brilliant jewels are
Precious Gems
Valuable Ores, such as gold, platinum, and silver are examples of
Precious Ores
In the year 2000, the most valuable precious metal was
Rhodium
85% of the worlds supply of rough diamonds comes from
South Africa
A temporary association of individuals or business firms organized to perform a task that requires a large amount of funds is a
Syndicate
What financial advantage does a person with a home mortgage enjoy?
Tax benefits
Compare the collecting process before and after the Internet
The collecting process before the Internet was introduced was very different than it is now. Collecting items was a very difficult process because you had to go out and find the items you were looking for. You had to do research and really search hard in order to find what it is that you were looking for. Now that the Internet exists, it is very easy to find what it is that you are looking for. With websites that allow you to network with others and also websites that allow you run searches, you are able to find exactly what it is you are looking for very easily.
Drawbacks of finding collectibles on the Internet can be
The inability to examine them for flaws
What are the risks of investing in gemstones?
The risk with investing in gemstones is that they are not very liquid, meaning that they are not very easy to convert into cash. It is also hard to determine whether the gems you are investing in are high quality or not and you will need to consult an expert which may cost you money. Another risk is that political unrest in certain countries may affect the price of the gems and finally you will most likely have to buy your gems at higher retail prices and sell them for lower wholesale prices.
When do many investors start buying larger properties?
When the equity in their original investments increases.