Real Estate Investment (Real Estate License Renewal)

Your client hates the fact that out of her $1,027 monthly payment, more than $900 is going toward interest. What do you tell her?

"That's amortization for you."

You're working with a seller whose home was valued at $100,000 a couple of years ago. Through some market research, you've discovered that this area is seeing an appreciation rate of about 2% per year. What is the value after three years?

$106,121

What's the maximum term of a grantor retained income trust?

10 years

Under Section _______ of the Internal Revenue Code, an investor in real property can sell that property, reinvest the proceeds in a "like-kind" property, and defer paying capital gains taxes.

1031

What's the average length of a community shopping center lease for a major tenant?

15 to 20 years

Tyrell and Barb bought a commercial investment property in 2009 during the real estate market downturn. Through what year will they be able to depreciate the investment?

2048

A buyer put down $10,000 toward the purchase price, financed the rest, and now has a cash flow of $2,800 after repairs and debt service. What is the buyer's ROI?

28%

Over how many years is a commercial property depreciated?

39 years

Curtis wants to do a 1031 exchange. He just closed on his property. How many days does he have to identify a new property?

45

A property valued at $500,000 is returning a net annual income of $45,000. What is the cap rate for this investment?

9%

On his desk, Bob has client files, phone messages, and invoices from creditors. How would you classify a phone bill?

A general record

There are three types of international buyers: those who have work visas and are looking for a home to purchase while they're in the U.S., those who are looking for a vacation home in the U.S., and those who are looking for ______.

A luxury home to purchase as an investment

What type of financing can be used for a purchase, or a significant remodel or improvement, including building on vacant land?

Acquisition

Which of the following terms refers to the process of combining separate adjacent parcels into one piece of land?

Assemblage

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 utilities

There are many advantages to holding property within a trust. One of the most important advantages is that some trusts ______.

Avoid probate

What can tax losses be used to offset?

Both passive and active income

Tenants in the building that Harrison manages receive internet service with their rent. Harrison wants to upgrade to fiber optic, but the ______ don't contain enough money to make the upgrade this year.

Capital reserves

Which class of office building has adequate systems that are fair to good for the area?

Class B

In nine states, married couples who purchase property during the marriage own that property equally, meaning they own it as ______.

Community property

For condominium properties, the owner's rights are detailed in which document?

Condominium bylaws

Understanding her tenants' business and their plans for future expansion, Terry is thinking about what changes would need to be made to the design, floor plan, and power requirements, and who will pay for the build out. Which office building property manager's duty is this?

Considering growth for tenants

Craig's loan is secured by a mortgage. Who holds legal title when this security instrument is used?

Craig

One alternative to foreclosure is a voluntary conveyance of ______.

Deed

Which of the following is a form of commercial bank revenue related to mortgage financing?

Demand deposits

Investors can determine the relative strength of the job market by evaluating the ___________

Employment rate

What is a tax on your right to transfer property at your death called?

Estate tax

A tenant violated the terms of his lease by having pets, so the property manager has started ______ proceedings to get him removed from the apartment.

Eviction

Which banking-related entity shares similarities with the purpose and function of the NCUA?

FDIC

According to the International Council for Shopping Centers, which commercial property comprises only 1% of the retail industry?

Factory outlet

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

Financial

Fiona signed a lease with her landlord for a commercial building. A percentage of Fiona's sales will be paid to the landlord, in addition to her lease payment. Why would Fiona agree to this arrangement?

Fiona wants to reduce her base rent.

How many dwelling units does a commercial residential property have?

Five or more

What's the name of the tax program that requires a withholding of a portion of the gross purchase price when foreign owners of real estate in the U.S. sell that property?

Foreign Investment in Real Estate Property Tax Act (FIRPTA)

In this type of corporation, a centralized management group of elected officers governs the company's affairs, while the designated licensed broker is directly responsible for the real estate transactions.

General C corporation

The three general groups of international buyers that real estate professionals may encounter are those who ______, those who are looking for a vacation home for when they travel to the U.S., and those who are looking for a luxury property as an investment.

Have work visas and are looking for a home to purchase while they're in the U.S.

Arnold plans to open a brokerage. What might make him select a sole proprietorship legal structure?

He wants control over branding.

What's compound interest?

Interest that's reinvested into an account that then earns interest

Mandy is researching demographics, income levels, types of industries in the area, and nearby buildings. She wants to know what her building offers compared to the other office buildings in the area. Which office building property manager's duty is this?

Knowing the competition

Which one of the following entities meets the definition of a business structure that has no general partners and whose owners have limited personal liability?

LLP

Carmine buys unimproved land and develops it in stages, selling it off as it's improved. Carmine is a _______.

Land banker

Which of the following is a disadvantage of investing in residential real estate, including a single-family home rentals?

Landlord responsibilities and tenant relationships

Which of the following single-lot properties have a greater potential for being rezoned?

Lots located near town lines

What is the best definition for "the time value of money"?

Money gains or loses value over time.

To compute a monthly principal and interest payment, which of the following pieces of information do you need to know?

Mortgage loan value, annual percentage rate, loan term, and payment frequency

What kind of budget serves two primary purposes: to help property managers maximize profitability and to avoid unforeseen major expenses?

Operating

Which payment plan consists of the borrower making payments of interest and principal on a periodic basis, with a large amount due at the end of the loan term?

Partially amortized payment plan

Life insurance companies sometimes like to insure their investment in commercial projects by insisting on an equity position. This is known as ______ financing.

Participation

Residential, commercial, and industrial are submarkets within which real estate market segment?

Property type

Which REITs make money by incurring short-term debt to acquire longer term mortgage securities, earning the spread between the two rates?

REMTs

What does REIT stand for?

Real estate Investment trust

Which of these types of tenants most often uses a percentage lease?

Retail

Which stage of the investment cycle is an investor in when there is depreciated basis and tax-deferral through 1031 exchanges?

Reversion

The market for real estate in Chad's area has experienced a sudden increase in demand, and there aren't enough homes to go around. It seems like a bidding war ensues for every available property. What's the condition of the real estate market in Chad's area?

Seller's market

How many years of income does yield capitalization analyze?

Several

Changes in the national market may have little (or significantly delayed) impact on local markets. This is because the real estate market is ______.

Slow to respond

Which shapes are the most common for community shopping centers?

Straight line, L-shaped, and U-shaped

Which of the following statements describes an off-site residential property manager?

Supervises on-site personnel for multiple properties

Sam and Monique knew that the old industrial site that they purchased needed some environmental cleanup, but they don't have the cash and put cleanup on hold. The EPA hired its own crew to deal with groundwater issues because of industrial solvents and billed Sam and Monique $164,000 when the job was complete. If Sam and Monique don't pay the bill, which one of the following could happen?

The EPA can seek damages in court for up to three times the actual cleanup costs.

Which one of these would void a deed that's intended to convey property?

The grantor is not mentally competent.

When a borrower has paid off the loan, how is the release handled if the security instrument is a mortgage?

The lender executes and records a satisfaction of mortgage and returns the note to the borrower.

The maker and the payee have a promissory note agreement that states that the payee will pay back the money owed to the payee, with interest. Who's required to sign the note?

The maker only

Which of the following is a true statement about when a promissory note is sold?

The promissory note is endorsed to the new owner of the loan.

What is business risk?

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

During the option period to renew a lease, who determines whether the option will be exercised?

The tenant makes the decision.

Valid real estate contracts require competent parties, a legal description, consideration, a lawful objective, mutual agreement, and _______.

They must be in writing and signed by the parties

Which of the following statements is true regarding developers who plan to allow FHA financing in their subdivisions?

They must follow the FHA's minimum building standards.

How many anchor stores does a super-regional shopping center normally have?

Three or more

Generally, strip store leases are created to run ______.

Three to five years

The introduction of a development into an area can impact ____________, which, in turn, can have an effect on local businesses.

Traffic patterns

A living trust differs from a testamentary trust in that a living trust is established to convey property as well as to ______.

Transfer ownership before death and avoid probate

You have a client who is leasing commercial space. The lease terms call for him to pay a portion of the landlord's taxes, insurance, and maintenance. What type of lease does your client have?

Triple net lease

All trusts have three parties: the trustor, the beneficiary, and the ______.

Trustee

According to the IRS, how much can active investors deduct from their active taxable income?

Up to $25,000

With this alternative to foreclosure, a borrower hands over the property to the lender rather than face foreclosure proceedings.

Voluntary conveyance of deed

Mary Kay is looking at a building that has a total of 65,000 square feet, and an efficiency rate of 75%. How many square feet of productive space does the office building have?

48,750

Grant is on the hunt for older, single-family homes with status ... and a tax credit of as much as 20% to offset the expense of any needed renovations. What type of investment opportunity is Grant looking for?

A historic property

A subchapter S corporation is taxed as ______, whereas a C corporation is taxed at both the corporate and shareholder levels.

A partnership

Harvey 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 reverse tax-deferred exchange

What type of business may be defined as: "An organization with many members who jointly participate in a real estate investment"?

A syndicate

The time frame between purchasing land and selling it is known as the __________________.

Holding period

When is an investor required to pay the alternative minimum tax?

If the tax calculated on IRS Form 6251 is higher than that calculated on the investor's regular tax return.

Which of the following describes community property rights?

In some states, it's a form of property ownership for married couples with equal ownership and possession of any property acquired during the marriage.

Which of the following is true regarding the federal gift tax?

It applies even if the donor didn't intend it to be a gift.

What's the purpose of an attornment clause in a lease?

It notifies tenants that their lease is still in effect if the building ownership changes.

Which of the following is an advantage of leasing for a single-lot investor?

Leasing gives the investor an income stream for the term of the lease.

Kali's good at bargaining. She's willing to concede some things in order to entice a new tenant into taking one of the rental spaces in the mall, but she always ensures that she's looking out for the owner's interests by including a certain number of escalation clauses. Which commercial property manager duty is Kali exceptionally good at?

Leasing the property

Pam is a partner in CRL Brokerage. Her liability is limited to the amount of money she has invested. What type of partner is Pam?

Limited

Which of the following is one benefit to business owners for leasing instead of buying real estate for their business?

Monthly rent is a tax deduction as a business expense.

Ken understands the importance of interpreting market conditions. He has found that keeping track of how many new homes are being built in his area is a valuable indicator of demand. Which market indicator provides this information?

New building permits

Ken, Dale, and James were brothers who owned more than 100 acres as tenants in common. The relationship between Ken and James disintegrated, and so James initiated a lawsuit. The end result was that the court gave each brother a designated set of acres to own. What did the court grant?

Partition

Your client asks you which properties are multi-family residential. The most complete answer you can give is ______.

Plexes and apartment buildings

It's time to change the air filters in a 10-unit apartment complex. What type of maintenance will you be performing?

Preventive

What does a mortgage real estate investment trust invest in?

Real estate debt

Which of the following statements regarding investment is true?

Real estate investment provides the potential for earning income two different ways from the same investment.

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

Real estate investment trust

Which of the following commercial properties are commonly referred to as malls?

Regional shopping centers

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

Nadia wants to invest in a neighborhood shopping center. What size trade area can she plan to service?

Three-mile

When discounted cash flow analysis is used, income that will be received in the future is discounted. Why?

To account for inflation and the time value of money