Chapter 6: Real Estate Investments

Which of the following is an advantage to investing in real estate...?

-The use of borrowed funds to purchase investment properties -Investment properties can serve as tax shelters -Growth in property values typically outpaces inflation

Using the straight line depreciation method, residential property can be depreciated over how many years...?

27.5

The cost to acquire a property, plus the cost of the physical improvements, minus the depreciation claimed as a tax deduction is equal to the...?

Adjusted Basis

Cash received in a tax-deferred exchange is known as...?

Boot

Why has real estate traditionally been a good investment...?

Growth in property values have outpaced inflation

The use of a mortgage when buying an investment property is an example of...?

Leverage

The use of debt financing of an investment to maximize the return per dollar of equity invested is known as...?

Leverage

The use of a lower amount of leverage results in ..... risk to the investor?

Lower

A real estate security can include

Mortgage Notes

Real estate investments fall into two categories, real property and...?

Real Estate Security

The new property in a 1031 exchange is referred to as the...?

Replacement Property

This is a section of the U.S. Internal Revenue Service Code that allows investors to defer capital gains taxes on any exchange of like-kind properties for business or investment purposes...?

Section 1031 Exchange

A method of depreciation under which improvements are depreciated at a constant rate throughout the estimated useful life of the improvement is known as...?

Straight line depreciation