Examples questions (commercial an investment properties)

A capital gain

Breeja sold her investment property for $330,000. Her adjusted basis in the property was $253,000. The difference between this sale price and the adjusted basis is ______. A capital gain After-tax cash flow A rate of return The finance rate

Retail shopping centers Equity REITs invest in income-producing property, such as a retail shopping center. Undeveloped land isn't likely to produce income, and equity REITs don't invest in mortgage debt. That's the role of mortgage REITs.

Bridget has an investment portfolio that includes an equity REIT. Which of these is most likely to be part of the REIT's investment? Mortgages secured by commercial properties Mortgages secured by residential properties Retail shopping centers Undeveloped land parcels

The property in an exchange must be like-kind.

In a 1031 exchange, there are rules governed by Section 1031 of the Internal Revenue Code. The rules include _______. The basis of the original property is cancelled. The new property must be lower value than the relinquished property. The property in an exchange must be like-kind. The replacement property has to come with less debt load.

Coordinates the exchange

In a 1031 tax-deferred exchange, what role does the qualified intermediary serve? Acts as trustee Coordinates the exchange Insures the replacement property Records the deed

Economic depreciation and physical deterioration

In investments, each type of depreciation is defined by a particular event. Which of the following best describes a depreciation type and an event it's tied to? Economic depreciation and cost recovery Economic depreciation and physical deterioration Operating depreciation and taxing authority Tax depreciation and physical deterioration

Tax depreciation and cost recovery Tax depreciation is tied to cost recovery.

In investments, there are two types of depreciation, and each is defined by a particular event. Which of the following most accurately pairs the depreciation type with the event it is tied to? Economic depreciation and cost recovery Operating depreciation and taxing authority Tax depreciation and cost recovery Tax depreciation and physical deterioration

Bob may have an income shelter.

Investor Bob owns a commercial property. He receives $100,000 in income from the property but is only taxed on $75,000. What might explain this? Bob may have an income shelter. Bob's accountant miscalculated his taxes. Bob took a capital gain exclusion. Some of Bob's income is portfolio income and not taxable.

That risks involved with real estate investments need to be analyzed

Luther is analyzing an investment property. During his analysis, he looks at environmental sensitivity, political climate, the potential for a development moratorium, economic downturns, etc. What is Luther demonstrating? That financing is important That real estate investments have too many risks That risks involved with real estate investments need to be analyzed That there are too many factors to consider when investing in real estate

Corporations

Real estate investing may be done individually, in partnerships, or through what other means? Corporations Credit reports Credit unions E&O insurance

Strip mall

Since the birth of their first child, Charlotte and Darryl have spent far more time at the drugstore than they care to admit. Luckily, it's close to their house in a small area of retail stores arranged in an L-shape. What kind of retail space does this describe? A. Factory outlet B. Mall C. Neighborhood center D. Strip mall

Risks

Tenant turnover, increases in property taxes, and other costs are examples of what? Illiquidity Liquidity Need for expert help Risks

Financial

The income from Daniella's rental property is barely covering her expenses. Two of her six tenants have moved out, and she had to upgrade the building's heating and air conditioning systems. This is an example of which type of risk at work? A. Business B. Financial C. Liquidity D. Safety

Business

The numbers on the residential apartment building Tony bought looked great on paper. However, expenses have been far more than what he originally budgeted. This is an example of what type of risk? Business Interest rate Liquidity Safety

Divide net income by debt service Divide net income by debt service to get the debt coverage ratio.

What do you do to determine debt coverage ratio? Divide debt service by gross income Divide net income by debt service Subtract expenses from income Subtract income from expenses

A qualified intermediary

What type of professional must an investor use to conduct a tax-deferred exchange? A certified public accountant A licensed real estate professional An appraiser or real estate broker A qualified intermediary

Zero years (personal residences cannot be depreciated) Depreciation is limited to investment properties. Owners can't depreciate a personal residence or vacation home

Jennifer is the owner of the single-family residence in which she resides. How long can she take to depreciate her property? 27.5 years 39 years Indefinitely Zero years (personal residences cannot be depreciated)

Donald "Remember, the property must be held for investment or business purposes to qualify for a 1031 tax-deferred exchange."

John sells his single-family home and purchases a new home for his family to reside in. Marcus owns a single-family home, but rents it out to a co-worker while he is on an extended two-year military tour overseas. Donald sells an apartment complex and purchases a new complex in a different part of the city. Which of these consumers is most likely to take advantage of a 1031 tax-deferred exchange? A. Donald B. John C. John and Donald D. Marcus

180 Investors who want to use the 1031 tax-deferred exchange must identify the property within 45 days and must close within 180 days.

John wants to do a 1031 tax exchange. He just sold his property. How many days does he have to close on a new property? 180 30 45 60

A reverse tax-deferred exchange

Jose 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 buy and hold A fickle investor A fix and flip A reverse tax-deferred exchange

Short-term

Kayla purchased a home in January, fixed it up, and then sold the property in May of the same year for a gain of $45,000. What type of capital gain is this? Appreciated Long-term Short-term Temporary

Heavy industrial

Trent works for a well-known motorcycle manufacturer in its powertrain operations facility. He loves being around all of the heavy machinery and seeing the bikes come off of the production line. What type of space does Trent work in? A. Heavy industrial B. Light manufacturing C. Loft/warehouse buildings D. Retail

It allows investors to defer capital gains taxes when selling a property, provided they buy another property.

What advantage does the 1031 tax-deferred exchange offer? It allows investors to avoid ever paying taxes from gains realized on their investments. It allows investors to defer capital gains taxes when selling a property, provided they buy another property. It offsets capital gains for homeowners who have lived in the home for at least two years. It provides a tax shelter for non-real estate investments.

Real estate debt

What does a mortgage real estate investment trust invest in? Lease contracts Personal property Real estate debt Real estate property

It means that the income received is sheltered from taxation.

What does income shelter mean? It is a type of bank account that investors use to save money. It means that the income received cannot be sheltered from taxation. It means that the income received is sheltered from taxation. It means that the income received is taxed at a higher rate.

It allows the lender to participate in the project by investing funds and realizing a return.

What is a participation mortgage? It allows the lender to increase the rate on the mortgage after the borrower pays off a specific percentage of the loan. It allows the lender to participate in the project by investing funds and realizing a return. It is a long-term estate for years pledged to the lender instead of the property. It uses the equity of one property to fund the purchase of another and is a common investment strategy.

Income analysis

Which method to estimate a business's value examines the ability of the business to generate income? Comparable sales analysis Income analysis Liquidation analysis The cost approach

Duplex, office building, or warehouse

Which of the following could an investor who sells an apartment house buy using a 1031 exchange? Duplex, office building, or warehouse Duplex only Office building only Warehouse or office building only

1031

Which section of the Internal Revenue Code allows the owner of real property to sell that property, then reinvest the proceeds in a "like-kind" property and defer paying any capital gains taxes? 1030 1031 180 360

Mall

Which type of retail space usually has businesses offering general merchandise and fashion and is typically enclosed with inward-facing stores connected by a common walkway? Factory outlet Mall Neighborhood center Strip mall