Characteristics of Real Estate Investing UNIT EXAM

Joanie sees herself as a mover and shaker, a leader, someone who jumps in and gets things done. She likes to be involved and in charge. When she decides to start investing in real estate, which of these choices is she most likely to select as her investment vehicle?

A multi-family residential income property

What is static risk?

An insurable business risk that includes insuring for accident liability, fire, theft, and vandalism

What is dynamic risk?

An uninsurable business risk resulting from economic, tax, and market changes

Which of these is a dynamic risk?

MARKET CHANGE

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

What type of real estate investment is similar to collateralized mortgage obligations (CMOs)?

Real estate mortgage investment conduit

Blain is a wholesale investor. Which of the following strategies will interest him most?

Reselling the property without putting any time, money, or energy into cleaning it up

Brandon recently purchased an old warehouse building. This building will serve as a hub for local deliveries of fruits and vegetables within the state. During its first week in operation, one of the delivery drivers was involved in an accident that spilled coconuts all over the road and shut down the interstate for hours. What type of risk is this?

STATIC

What is capital risk?

The risk that an investor cannot secure financing at an affordable rate

What is financial risk?

The risk that is directly related to leverage

What is business risk?

The risk that the required return on investor capital will not be met

Dynamic and static risk are considered ________ risks.

buisness

Joaquim analyzed a potential opportunity and determined that if he invested $250,000 in the commercial property, he'd likely see a return of 12% on this investment. After several years, Joaquim is seeing a measly 2% return. What type of risk did he fall victim to?

buisness risk

Which type of investor will be marketing to obtain renters rather than buyers?

buy and hold

The risk that an investor cannot secure financing at an affordable rate is called ______ risk.

capital

Jason is planning to invest in a new commercial development. He'd like to invest $400,000 and secure another $100,000 through financing. After shopping around, Jason could not find financing at an affordable rate. Of what type of risk is Jason the victim?

capital risk

The buy-and-hold investor enjoys appreciation potential, tax write-offs, and ______.

current income

Rob purchased a property five years ago for $200,000. He put down $50,000 and financed $150,000. Today, the property is valued at $250,000. What is this an example of?

equity build up

The increase a property's value beyond what the investor originally invested as a down payment is called _______.

equity build up

The risk that is directly related to leverage is called ______ risk.

financial

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?

financial risk

Which type of investor will find a property in disrepair, make the required repairs, then sell the property for a profit?

flipper

What are the two types of real estate investment trusts?

mortgage and equity

What is the purchase agreement phrase that wholesalers rely on for their investment strategy?

or assigns

What's the amount of money you have now called?

present value

Olivia purchased a property five years ago for $200,000. She put down $50,000 and financed $150,000. Today, the property is valued at $250,000. She'd like to purchase another property, so she refinanced her current property and used the equity to purchase a new property. Of what is this an example?

pyramiding

The use of one investment to finance another is called _______.

pyramiding

What does a mortgage real estate investment trust invest in?

real estate debt

What type of real estate investment must distribute 95% of its income to beneficiaries?

real estate investment trust

What type of real estate investment may meet the definition of being a security and must adhere to the rules and regulations of the Securities and Exchange Commission?

real estate syndicate

Which type of business risk is insurable?

static

The idea that money gains or loses value over time describes which concept?

time value of money

Investor Maisy found a great deal on a property. Instead of closing on it herself, Maisy is going to "assign" it to another investor for a fee. What type of investor is Maisy?

wholesaler

Which type of investor finds a deeply discounted property, closes on the property transaction, and then immediately sells it to another investor?

wholesaler

The risk that the required return on investor capital will not be met is called ______ risk.

Buisness

Which type of business risk is uninsurable?

DYNAMIC