Real Estate Investment Exam

Cheryl bought her home three years ago for $217000. Assuming her home appreciated at the 3% rate typical of her current market; how much is her home worth now?

$237,121.76

The IRS will only allow _______ of passive losses to be deducted against active taxable income.

$3,000

Rufus is once again before a judge for violating fair housing laws. The judge has found Rufus guilty and is imposing the maximum monetary penalty she can for a two-time offender who has committed the second offense within five years of the first which is __________.

$37,500

Juan purchased a property for $420000 and financed $336000 of it. The assessed value of the property is $387000. The property appraisal came in at $432000. Which of these amounts is used in calculating the property tax?

$387,000

Bill gave his son Chandler $40

000. He was surprised to learn that it was subject to a tax. What type of tax is this? , Gift tax

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

Which of the following plexes would be considered commercial property?

A five-plex in a residential zone

When it comes to investments capitalization rate risk and value are closely tied together. Which of the following is a true statement?

A lower capitalization rate indicates lower risk.

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 is assessed value?

A percentage of market value; also the amount of property value to which the tax rate is applied

Direct capitalization converts what into a market value?

A single year's expected income

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

A syndicate

What is static risk?

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

Which of the following investors is exempt from fair housing laws?

An investor who owns fewer than three single-family homes

Which of the following may represent an exemption from federal fair housing laws?

An owner-occupied rental property

What is dynamic risk?

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

Which of the following statements is true regarding trusts?

Any asset may be held in a trust.

Investors who maintain strong relationships with local ________ will have a source of information about trends in commercial property values and net operating incomes.

Appraisers

Which of the following scenarios describes an example of unilateral rescission?

Bobby, the buyer, makes an offer on a house that doesn't meet the appraisal contingency. He cancels the sale.

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

Which of the following is one reason for the popularity of commercial leasing?

Business owners can often make more money on their business than they can on the appreciation of the building where they conduct that business.

Which document details the duties of the condominium board and the scope of its power?

Bylaws

In terms of investment liquidity means an investment ______.

Can easily be converted to cash

Which class of office building is aimed at tenants requiring functional space at below-average rents for the area?

Class C

In this type of corporation; stockholders; directors; and company officers are typically the same people.

Close

Theodore is planning to purchase one of two companies he's been researching. Both produce the same type of tools. Company A has a high operating leverage. Company B has a low operating leverage. Theodore is favoring Company A because of it's operating leverage. What advantage does Company B have that Theodore might not have recognized?

Company B doesn't have to increase sales as much as Company A to cover its fixed costs.

HUD completed an investigation after which it received assurances that the situation would be remedied and that steps were being taken to ensure the discriminatory acts won't happen again. What's this an example of?

Conciliation

Connor was the seller and Duke was the buyer when Connor sold his property. Who conveyed the title?

Connor, as grantor

What agency administers the Interstate Land Sales Full Disclosure Act?

Consumer Financial Protection Bureau

Which statement best describes an amortized loan?

Debt that is paid off by making periodic payments consisting of interest and principal

Buyers Tony and Sylvia know the postal address of the property they're purchasing but are wondering about the legal description of the property. Where is the most likely place to find the legal description?

Deed

A decrease in property value over time is called ______.

Depreciation

Ricky is once again reviewing the plans for expansion. He's always trying to find ways to keep the tenants happy by addressing their growth needs while ensuring that making upgrades to the facility doesn't significantly impact the owner's profits. Which office building property manager's duty is this?

Determining capital expenditures

Which type of business risk is uninsurable?

Dynamic

In a build to suit arrangement landowners build to suit the needs of _______________________.

Either a buyer or a long-term tenant

Which REIT type specializes in owning certain building types such as apartments or office buildings?

Equity

Which lease clause verifies facts that are already in writing?

Estoppel

Gabi's been researching commercial property in her area and has decided to invest in a retail space that although located outside the main shopping area will offer shoppers a wide variety of name brand goods at discount prices. What type of retail space is Gabi contemplating?

Factory outlet

Which of these is a static risk?

Fire damaging the building

Nat has a friend who's in the home construction business and he says that in the last six months there's been an increased demand from developers to build homes that are more energy efficient and to use sustainable non-toxic building materials. What current market trend is this an example of?

Greener buyers

Ziggy has his eye on a residential single lot that's located next to a commercial area. There are rumors of imminent rezoning of the residential area to mixed use. Why is Ziggy excited about this prospect?

He knows the rezoning will increase the lot value.

Which of the following do investors like to avoid?

High tax liabilities

Which type of real estate investment trust derives its income from the rent or sale of property and interest dividends?

Hybrid REIT

Which of the following is a risk most associated with wholesaling as a real estate investment strategy?

Inability to immediately resell the property for a profit

A calculated interest rate in an adjustable rate mortgage consists of ______ plus margin.

Index

Adjustable rate mortgage interest rates are often linked with a recognized ______.

Index

What exemption to the "every two years" rule concerning the capital gains exclusion allows a seller to claim a partial exclusion when the seller is forced to sell early?

Involuntary conversion

What's the purpose of the nondisturbance clause in a lease?

It assures tenants they won't be evicted if they adhere to lease terms.

Fairwell Lending must seek the court's permission to foreclose on a property used as collateral for a loan that is in default. What type of foreclosure process is likely being used?

Judicial foreclosure

If a tenant moves out before a lease term expires and the landlord is able to rent the unit the tenant is ______.

Liable for rent for the month during which the move-out occurred and any month until the end of the lease that the landlord is unable to rent the unit

Damien was representing a commercial property owner. Which one of the following duties can the owner expect Damien to perform on the property owner's behalf?

Locate and qualify potential tenants.

Milo is interested in converting his rental properties into condominiums. He's completed his feasibility study and determined that the conversion costs will pay for themselves at sale time and the market will support the conversion. What else does Milo need to do prior to conversion?

Make certain the conversion will be allowed by the local government

Which type of commercial property offers general merchandise and fashion and is typically enclosed with inward-facing stores connected by a common walkway?

Mall

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

Manages the day-to-day operations of a single property

Why is it important for tenants and owner/landlords to review the insurance section of a commercial lease?

Many times the amount of insurance specified in the lease is higher than the amount a tenant actually carries and higher than the amount the landlord actually requires.

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

Money gains or loses value over time.

Which organization manages and charters credit unions?

NCUA

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

Which of the following items does the IRS consider personal tangible property?

Office Equipment

When does substantial performance of a contract occur?

One party has met most but not all of the terms specified in the contract and may be required to pay damages for the terms not met.

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

What type of income is received through activities not directly related to active participation in a business or earnings from wages such as rental income?

Passive

The owner of a nail salon that is located in a strip mall pays base rent of $1800 and 10% of gross sales. What kind of lease do they have?

Percentage

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?

Promote the sale of the condominium offices

Property A is in a highly appreciating area. Property B was assessed identically to Property A five years ago but has lost value. Without periodic reassessments which of the following is true?

Property A and B would pay the same property taxes

The income from what reliable source benefits the entire community by funding essential services and public works?

Property taxes

What does REIT stand for?

Real estate Investment trust

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.

The Tax Cuts and Jobs Act made changes to the AMT that effectively ______.

Reduced the number of people the tax affects

Which type of commercial property offers parking surrounding the outside of the property but also indoor parking beneath the building?

Regional shopping center

Which of the following scenarios is an example of corrective maintenance that may be overseen by a property manager?

Replacing a section of roof after a leak

Second-home condo investments that are purchased with a money-back guarantee and lock-in management agreement are generally considered by the SEC to be _______.

Securities

Mary lives in a cooperative. That means she owns ________.

Shares in a corporation

The building owner just congratulated Cyrus on attracting tenants to the office building that have similar business interests. At which office building property manager's duty has Cyrus excelled?

Shopping for tenants and getting the right tenant mix

Which of the following is the simplest form of business structure where the owner is personally responsible for all business debts?

Sole proprietorship

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

Which type of business risk is insurable?

Static

Which special lease clause stipulates that the tenant is responsible for paying any increase in taxes over the base year's taxes; in addition to the base rent?

Tax

With a triple net lease the tenant pays ______ separately from the base rent.

Taxes, insurance, and maintenance

Which one of the following statements about testamentary trusts is true?

Testamentary trusts do not avoid probate.

Consent is not present when _______.

The contract is signed under duress or undue influence

In response to the increase in foreclosures and losses on their balance sheets not to mention a reduced market for subprime loans many lenders slowed their lending activities. What was the impact of this on the overall economy?

The economy headed into a recession.

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

Who are the parties to a property management agreement?

The property manager and property owner

When Edmund died he left several properties to his heirs. He owned a grocery store and a campground outright and a strip mall that was held in a living trust. Which of the properties if any; did NOT have to go through the probate process after his death?

The strip mall

What advantage does the LLC form of business ownership offer?

They offer pass-through taxation similar to partnerships.

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

Three- to six-mile

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

Trustee

How many dwelling units does a multi-family residential property have?

Two or more

Which of the following can be defined as what a property is worth?

Value

What do investors need to determine before they can calculate their taxable income?

What their net operating income is

When does a buyer's market occur?

When supply is high and demand is low

Bob signed a contract to purchase Ingrid's apartment building. Bob decided he didn't want to be a landlord

and Ingrid decided she didn't want to sell and move to Maui. They mutually agreed to cancel the contract, and Ingrid returned Bob's earnest money. This is referred to as ______. , Rescission

Taxes

construction codes and development regulations are all ways that ______ can influence a real estate investment and potentially increase or decrease the investment's value. , Government

A professional

on-site measurement of the lot lines and dimensions of a property is known as ______. , A survey

Which of the following acts requires office buildings to be accessible to individuals with a disability

such as those who use wheelchairs? , Americans with Disabilities Act

Irmgard

the owner of an office building is interested in renovating her building and changing it into a condo format. What is the change from office building to office condominium known as? , Conversion

In the real estate market

when demand exceeds supply, what does it mean? , There are more buyers than available homes, and prices will be higher.

Marcia's house and her neighbor's house have the exact same floorplan and

when they were newly built five years ago, they looked alike. but Marcia's house now has a new front porch ; shutters; beautiful landscaping, a pool, and is located in a cul de sac, making her house very different from her neighbor's. Which characteristic of the real estate market does this refer to? , Uniqueness