RE INVESTMENT TEST SAE
Community shopping centers have a range of ______ to _____ tenants....And serve a trade area of ______ to _______ miles.
15 to 40; three to six
What is the average length of a community shopping center lease for a major tenant?
15-20
According to the IRS, how much can active investors deduct from their active taxable income?
25,000
Community shopping centers can serve a trade area of approximately what range in miles?
3-6
Maximum penalty for violation of fair housing laws for a two time offender who committed the second offense within 5 years.
37,500
Investors who want to use the 1031 tax-deferred exchange must identify the new property within ____ days of closing and must close on that property within ______ days from the date of sale of the first property.
45; 180
How many dwelling units does a property need to be considered commercial property?
5 or more
What type of tenant typically makes up half of a regional shopping center's tenant mix
50% General Merchandise Stores 25% service related businesses 15% clothing & shoes 10% dry goods
What's the average gross leasable square feet for a regional shopping center?
591,825
What can an owner or property manager negotiate with a prospective tenant to have included in the lease agreement in exchange for a prime spot in the center of the neighborhood shopping center.
A bonus. The bonus is secured as a percentage lease for each tenant.
What does cash on cash return mean?
A comparison of before-tax cash flow to cash invested (to compute you take the percentage of before tax cash flow divided by the total cash invested)
What is an income shelter?
A deductible allowance from NET income
Percentage Lease
A lease, commonly used for commercial property, whose rental is based on the tenant's gross sales at the premises; it usually stipulates a base monthly rental plus a percentage of any gross sales above a certain amount.
fully amortized loan
A loan consisting of equal, regular payments satisfying the total payment of principal and interest by the due date.
What is assessed value?
A percentage of market value; also the amount of property value to which the tax rate is applied
The element of a deed that signifies the grantor's intention to transfer title to the grantee is the ______.
Act of Conveyance
What are adjustable rate mortgages linked with?
An Index
To arrive at annual debt service cost, divide ______ by the debt coverage ratio.
Annual NOI
Barriers to completing a land development project may include a tough regulatory environment, the community's attitude toward development, the permitting process, and the _____________________.
Availability of Utililities
What is another name for a coupon bond, which is rarely issued anymore?
Bearer
An investor purchases a single lot and constructs a building to the specifications of a prospective long-term tenant. What's this called?
Build to suit
Dynamic and static risk are considered ________ risks.
Business
How is ad valorem property tax calculated?
By multiplying the property's assessed value by the tax rate
Many savings institutions remain local or regional with their physical operations. How do they reach a larger area to keep their institutions financially sound?
By participating in the secondary mortgage market
mutual savings banks have limitations on their lending activities, as specified in their ________________
Charter
CERLA
Comprehensive Environmental Response, Compensation, and Liability Act
A deed states, "For love and affection, the receipt and sufficiency of which is hereby acknowledged." what does this represent?
Consideration
What does CFPB stand for?
Consumer Financial Protection Bureau
What is a legal agreement or promise made between two parties called?
Covenant
How do you calculate maximum equity?
Divide cash flow by desired rate of return
____________ depreciation is tied to ____________ deterioration
Economic; Physical
Your clients, the Nguyens, have signed a contract for deed to purchase a property. What rights do the Nguyens receive?
Equitable title and right of possession
What type of trust allows the trustor to receive income from the property that is held in the trust?
GRIT (Grantor Retained Income Trust)
Roger is interested in converting his office building into office condominiums. He's had the building renovated, and filed the appropriate paperwork. What else does Roger need to do as part of the conversion process?
He needs to promote the sale of the condo offices.
What did the Title VIII of the civil rights act of 1968 prohibit?
Housing discrimination based on race, color, national origin, and religion?
Recent or imminent rezoning of a lot to higher use does what to land value?
INCREASES LAND VALUE
What is a risk most associated with Wholesaling?
Inability to immediately resale the property for profit
Income shelter
Income received is sheltered from taxation
What is portfolio income?
Income that comes from investments, which includes capital gains, interest, and dividends
capitalization is the process of converting what to what.
Income to value.
Calculating the return on investment can be a part of determining a property's ______.
Investment Value
Non-disturbance Clause in a lease
It assures tenants their possession of the unit won't be disturbed, as long as they abide by the terms of the lease.
Title I of the ADA prohibits what
It prohibits private employers, state, and local governments, employment agencies, etc. from discriminating against those with disabilities.
What organization is temporary in nature?
Joint Venture
Wrap-around loans are a form of _________ financing.
Junior (Because its junior to the initial loan that it's wrapping around)
Because real estate offers _______________, investors can sometimes make a 100% return on their investment..
Leveraging opportunities
Private loan companies may place a ______ on the property for which the loan is being taken.
Lien
What's the formula used to calculate monthly simple interest on a loan?
Loan Balance X Interest Rate / # of payments annually
If developers have questions about building a subdivision in a community, which organization should they approach for answers?
Local planning board
Meg is considering a move to a foreign country and wants to deed her property to her son, Christian, who's 16. Which of these must occur to make this transfer legal?
Meg must sign the deed and have her signature acknowledged
What info do you need to compute a monthly principal and interest payment?
Mortgage loan value, annual percentage rate, loan term, and payment frequency
Who is responsible for planning promotional activities for a regional shopping center?
On-site property manager and merchants association
What are the environmental assessment phases?
Phase I - preliminary site assessments. Phase II - sub-surface contamination investigations. Phase III - remediation and monitoring. Phase IV - closure.
What does the 1031 Tax Deferred Exchange mean?
Process which allows investors to sell a property and reinvest the proceeds into a new property (as part of a qualifying like-kind exchange) while postponing the payment of capital gain taxes.
Before a purchase contract can be signed for land that is being sold across state lines, what must developers provide to buyers?
Property report
What properties fall into Special Use category?
Public storage facilities, entertainment venues, hotels, golf courses, medical facilities
Installment Sales Contract
Purchase of real estate wherein the purchase price is paid in installments over a long period of time, title is retained by seller, and upon default by buyer (vendee) the payments may be forfeited.
Mortgage REITS invest in
Real estate debt.
The Tax Cuts and Jobs Act made changes to the AMT that effectively ______.
Reduced the number of people the tax affects.
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?
Regression
In order to entice tenants to sign a lease agreement with her, Margo is offering to decrease the tenant's first two months' rent. What type of concession is this?
Rental concession. These can sometimes be a decrease in rent or even free rent for a specified amount of time.
Subchaper S corporation
Same government regulations as a corporation, but it is taxed like a partnership.
With a promotional land sales agreement, who usually carries back a portion of the purchase in the form of a purchase-money mortgage or an installment contract?
Seller...this means the seller retains legal ownership of the land until the contract terms are satisfied.
How many years of income does yield capitalization analyze?
Several
What is a static risk?
Static risks are those where the effect can be lessened with insurance. Static Risks are always
Which shapes are the most common for community shopping centers?
Straight line, L shaped, and U shaped
What corporate structure avoids double taxation?
Subchapter S
Mega mall is another name for ______ __________ _____
Super regional mall
What term is used to describe more land than is needed for the planned development, but not enough land to carve out for another purpose?
Surplus Land
What 3 countries have banks that issue loans for U.S. real estate purchases?
Taiwan, the UK, and Canada
What allows investors to refinance repeatedly, generating tax-free cash to make additional investments?
Tax Free Refinancing
Tax Credit vs. Tax Deduction
Tax credits are dollar for dollar deduction in taxes owed. Tax deduction merely reduces the taxable income on which taxes are based.
What does a Grantor Retained Income Trust allow?
The Grantor to receive the income from a property while its held in trust.
what is a potential concern of a buyer who's entering into a contract for deed with a seller?
The buyer could lose the property after missing only one mortgage payment.
For tax years 2018 to 2025, a borrower can write off the interest on a home equity loan only if ______.
The funds are used to buy, build, or improve the home that secures the loan
Net Operating Income (NOI)
The income projected for an income-producing property after deducting losses for vacancy and collection and operating expenses.
What do the Condominium bylaws show?
The owners rights are detailed in the by laws
Which of the following statements is true about tax credits for investors who build affordable housing?
The tax credit the investor receives is a dollar for dollar reduction in taxes owed.
What is the 3 property rule?
The three-property rule says that an investor can identify up to three replacement properties and, in this situation, fair market value doesn't matter, provided the investor meets the debt load requirement.
The tenants in 2B want to make a few improvements to their leased apartment. The couple would like to rip up the carpet in the living room and have the hardwood floors underneath restored. What should they do first?
They must get the landlord's permission before they make any improvements to the property
What advantages does the LLC form of business ownership offer?
They offer pass-through taxation similar to partnerships.
Direct Capitalization Method
This method converts single year of expected income into a market value?
The ADA is composed of titles...Which title is concerned with the accessibility of public accommodations?
Title III
Why may a developer have to pay impact fees?
To address the burden on existing infrastructure caused by the development
What purpose do the articles of incorporation serve?
To establish the governing of the corporation (aka the certificate of incorporation)
What is the trustee's role when a deed of trust is used to secure property for a loan?
To hold legal title to the property on behalf of the beneficiary until the loan is repaired.
deed in lieu of foreclosure (Aka Voluntary conveyance of a deed)
Used by the mortgagor (borrower) who is in default to convey the property to the mortgagee (lender) in order to eliminate the need for a foreclosure.
Rather than face foreclosure, Tony decides to cut his losses. He voluntarily conveys his property to his lender. What type of foreclosure alternative is this?
Voluntary conveyance of a deed
What is a sale leaseback buyback?
With a sale-leaseback buyback, the seller can lease the property from the investor, and at the end of the lease term, buy the property back.
joint venture
an agreement between two or more companies to share a business project to make profit.
Sole Proprietorship
business owned and operated by one person. Owner assumes personal liability for all debts.
What qualifies for component depreciation?
components that can be separated out as tangible personal property qualify for component
Quitclaim Deed
deed that conveys an individual's property rights to another but has none of the covenants of the warranty deed
The risk that is directly related to leverage is called ______ risk.
financial
What is a wrap around loan?
home loan that allows the seller to maintain their existing mortgage while the buyer's mortgage "wraps" around the existing amount owed.
What are Capital Expenditures?
money spent by a business or organization on acquiring or maintaining fixed assets, such as land, buildings, and equipment.
how many times can a taxpayer claim a capital gains exclusion
once every 5 years
supply is low and demand is high
seller's market
Who is the morgagor and who is the morgagee?
the Borrower is the mOrgagOr and the Lender is the morgagEE (Hint use the two e's for the lender and the two o's for the borrower.)
How many dwelling units does a multi-family residential property have?
two or more
