Chapter 16

Accelerated Cost Recovery System (ACRS)

A depreciation method under U.S. tax law allowing for the accelerated write-off of property under various classifications.

Which of the following might be a motive for investing in real estate?

A tax shelter and a high rate of return on money invested.

Depreciation

An expense recorded to reduce the value of long-term tangible assets. Depreciation increases cash flow while decreasing reported earnings.

Appreciation

An increase in the value of an asset.

Tax Shelter

An investment offers tax savings in some form.

Which is a type of real estate income?

Capital gains taxes and income taxes.

Boot

Cash or other property added to an exchange or transaction in order to meet the value of traded goods equal.

Condition of the market means whether or not there's a demand for the planned investment; whether there is a supply; and what is the legal, social, and physical restraints are.

False

In order to invest wisely in real estate, the would-be investor should follow which of the following steps?

Identify objectives and goals as well as constraints that forecast for cash flow and cost of investing; Analyzer have analyzed the condition of the market and investment environment; develop or have developed a financial analysis.

Pyramiding

Keeping and refinancing property using equity and appreciation.

Capitalization

Mathematical estimate a future worth of property and converting that into a present worth.

Property operating expenses might include:

Property taxes, management fees, and maintenance.

Which is a risk factor in real estate investment?

Property values could decrease and income property might not yield an adequate income.

Modified Accelerated Cost Recovery System (MACRS)

The accelerated cost recovery system created by the tax reform act of 1986, which allows for greater accelerated depreciation over a longer time period.

Equity

The difference between the current market value of the property and the amount the owner still owes on the mortgage.

Leverage

The use of borrowed money to supplement existing funds for purposes of investment.

A real estate investor can enjoy all of the following kinds of ownership of property: fee simple, tenancy in common, joint tenancy, general partnership, limited partnership, corporate ownership, syndication, joint venture, or membership and real estate investment trust.

True

Investment in real estate requires The participation of an investor, the user of the property, the government and sometimes the mortgage lender.

True

The forecast need it for investing includes probably rent and vacancies, future selling price, and estimates of operating expenses.

True