Real Estate Investing Final exam

Tax - deferred exchange

A like-kind exchange, or 1031 exchange, is also referred to as a ______.

9%

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

regression

A property's value is dropping because the neighboring property's yard is filled with trash. What's this an example of?

Factory outlet

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

The property's assessed value

Ad velorum taxes are based on what?

This method converts a single year's expected income into a market value.

An appraiser is using the direct capitalization method to calculate a value for an investment property. Which of the following is true?

Build to suit

An investor purchases a single lot and constructs a building to the specifications of a prospective long-term tenant. What's this called?

Verify that utilities could be run to the new site

Angel was psyched. His investment dreams for a subdivision project were becoming reality. They were, that is, until the developer told him that there was an issue with bringing gas and sewer lines into the area. What did Angel fail to do before he invested?

lease

Another benefit of a long-term tenant for the landowner is the ______ is considered an asset and can be used as collateral for additional financing.

Decrease lending activity

As foreclosures increased in 2007, what was the response from lenders?

The lender can place Bonnie's loan in default.

Bonnie has a mortgage on her investment property, but she allows the homeowners insurance to lapse. Which of these is a possible consequence of this action?

Vacancy rates

Brandon wants to find out how many rental units are unoccupied in his area. Which market indicator provides this information?

Retail shopping centers

Bridget has an investment portfolio that includes an equity REIT. Which of these is most likely to be part of the REIT's investment?

Gross lease

Brittany has a small office in a professional building. She has a set monthly lease payment that has been calculated to include maintenance of the common areas in the building, such as the restroom and small kitchen, and all nets, utilities, and janitorial charges for her space. The payment also includes taxes and insurance. The landlord takes these payments and pays the individual expenses himself. What type of lease does Brittany have?

Mutual agreement

Carla Ricardo has been offered her dream job in another state. She asks her current landlord to let her out of her lease early. The landlord agrees to do so, with no strings attached. Carla and her landlord have decided to terminate the contract through ______.

assemblage

Catherine has decided to purchase additional parcels to add to the existing farm ground she's planning to sell. Catherine knows combining the parcels into one larger plat will increase the value of the land. What's this called?

Institutional lenders

Commercial banks fall into which of the following category of lenders?

Fannie Mae and Freddie Mac

Conventional loans may be conforming or nonconforming, depending on whether they meet ______ guidelines.

Flexibility in selling and subletting, similar to that of condominium owners

Cooperative shareholders under a condop structure have ______.

Yield capitalization

Discounted cash flow analysis and annuity capitalization are two forms of what?

The tenant makes the decision.

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

Three to five years

Generally, strip store leases are created to run ______________.

mutual agreement

Gloria is renting a cottage from Edward when she lands a job in Canada. She still has six months left on her lease, but Edward tells her he usually has no problem renting the cottage and releases her with no penalty. What type of lease termination is this?

Education and analysis

Good real estate investors tend to make decisions based primarily on ______.

A reverse tax-deferred exchange

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?

The landlord doesn't charge a percentage of sales until the tenant's sales exceed a break-even point.

How does the "break-even point" relate to percentage leases?

One

How many major tenants does a neighborhood shopping center normally have?

Subordination clause

If a landlord wants to notify a tenant that the leasehold interest in the property is subordinate to a mortgage, what clause would be included in the lease?

Investor will pay 25% on the $20,000 and either 15% or 20% on the other $120,000.

If an investor realized a gain of $140,000 on the sale of an investment property and the depreciated amount was $20,000, what would happen?

Either a buyer or a long-term tenant

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

Close

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

Improve and sell.

Jackson purchased a group of unimproved single lots and improved each one before listing them for sale. What type of arrangement is this?

Leasing the property

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?

Indestructibility

Land doesn't cease to exist, and it's not depreciated or covered by property insurance because of its ______.

mutual agreement

Leases may be terminated by expiration, eviction, or ______.

beneficiary

Martin placed all of his real estate investments in a trust, and the proceeds will be distributed through the trust to his son Nathan. In this situation, Nathan is the ______.

Limited

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?

A joint ventures

Participants in a joint venture may hold title as joint tenants or tenants in common.

Joint venture

Participants in this temporary organization are looking for profit. They may be corporations, partnerships, LLCs, or other entities.

Voluntary conveyance of deed

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?

Sanjay can do whatever he wants with his property.

Sanjay constructed a building on land that he owns in a build-to-suit arrangement for a tenant who's now in year six of a 10-year lease. What happens when the lease runs out?

60 to 120 acres.

Santiago plans to develop a super-regional shopping center. What size lot will he need?

The taxpayer's marginal tax rate

Short-term capital gains are taxed at ______.

Duplex

Some investors start their investment in real estate by purchasing which type of plex?

$3,000

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

Tax Credits

The government, in an effort to create more affordable housing, offers ______ for building housing for low-income individuals.

Maintain confidentiality and loyalty to the owner's best interests

The law of agency requires Westin, a property manager, to _______.

The tenants need to get the landlord's permission before they make any improvements to the property.

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. Which of the following statements about the improvements is true?

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

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.

A luxury home to purchase as an investment.

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 ______.

Stay up-to-date on local landlord tenant laws

To protect themselves from liability, it's a good idea for property managers to

The community's growth patterns

Tyrone is looking for single-lot investment opportunities. What would be most important for him to research?

Corporate Fiduciary

Under a land trust, the owner directs a ______ to hold title to the real estate.

The owner assumes personal liability for all debts

Under a sole proprietorship form of business, ______.

A bonus

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?

Consumer Financial Protection Bureau

What does CFPB stand for?

National Credit Union Administration

What does NCUA stand for?

Real estate debt

What does a mortgage real estate investment trust invest in?

Involuntary conversion

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?

groundwater contamination

What hazard do mining activities, landfills, or agricultural pesticides contribute to?

unsecured bonds

What is another name for debentures?

Percentage

What type of lease is used to secure a bonus from tenants who want a spot in the center of a neighborhood shopping center?

A qualified intermediary

What type of professional must an investor use to conduct a tax-deferred exchange?

Investment value

What type of value may consumers be interested in if they are looking for the potential rate of return?

An investor who holds land in inventory

What's a land banker?

Give the proceeds to the beneficiary

When a land trust expires, the trustee must either extend the trust term or sell the real estate and ______.

Have an attorney review the contract.

When a real estate transaction is financed using a contract for deed, what advice should real estate agents give to their clients?

To account for inflation and the time value of money

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

Profitability

When it comes to a property's highest and best use, which of the following applies?

Niche marketing.

When licensees focus all their efforts on one segment of the real estate market with the intention of minimizing, and perhaps even eliminating, the competition, this is known as ______.

Leasing

When they don't want to sell just yet, investors in single lots can sometimes gain value by _______________.

Age

Which factor is being considered if you're analyzing the number of Baby Boomers versus the number of younger consumers in a particular market area?

Canada, Mexico, China, India, and the United Kingdom

Which five countries had the highest percentage of buyers in 2020-2021?

Sale volume

Which market indicator can tell you the number of houses sold over a period of time?

Pipe or vent sticking out of the ground

Which of the following could indicate an underground storage tank is present?

Graciella, a 28-year-old unemployed parolee

Which of the following individuals would be a competent party to a contract?

Tenant screening

Which of the following is a residential property manager's duty?

Monthly rent is a tax deduction as a business expense.

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

Falling home prices

Which of the following led to the 2007 financial crisis and negatively impacted investors that purchased properties in the early 2000s?

A piece of land near a highway

Which of the following properties has the best chance for good appreciation in the relatively short term?

Apartment complex

Which of the following property types would a residential property manager manage?

Notification of pending auction, public auction, notice of eviction

Which of the following statements best describes a foreclosure by advertisement?

The total value of the property (or properties) selected as exchanges must be at least 95% of the value of the property being sold.

Which of the following statements best describes the 95% rule as it relates to tax-deferred exchanges?

An investor can identify up to three replacement properties and not encounter a restriction as to fair market value as long as debt load requirement is met.

Which of the following statements best describes the three-property rule as it relates to tax-deferred exchanges?

Supervisors on site personnel, for multiple properties

Which of the following statements describes an offsite residential property manager?

Mortgage and equity

Which of these are the two primary REIT types?

Land trust generally continue for a specified term, such as 10, 20, or 30 years.

Which one of the following is true about land trusts

Termination of co-ownership by partition

Which one of the following types of ownership termination allows each tenant to have a specific, divided portion (partition) of the property exclusively?

escalation

Which special lease clause stipulates increased rental rates at specific times during the lease term, or requires tenants to pay a proportionate amount of the overall increased utility expense, in addition to their base rent?

Tax

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?

Executor's deed

Which type of deed is considered a court-ordered deed?

net

Which type of lease is one in which the tenant pays the rent and some expenses related to the property (e.g., maintenance) separately?

Partnership

Which type of legal structure may be either general or limited in type?

As non-profits, they have fewer regulations, which translates to greater lending flexibility.

Why are credit unions able to compete with large commercial banks?

To ensure consistency with a city's general plan

Why are property developers required to pay special attention to issues regarding density, infrastructure, and traffic patterns?

They may be able to take advantage of tax deductions.

Why is it important for buyers of a residential property to understand how taxes relate to the whole ownership lifecycle?

Buyer

With a promotional land sale agreement, who's at risk if the underlying mortgage falls into default and foreclosure?

Short sale

With this alternative to foreclosure, borrowers receive permission from their lender to sell the property for less than the amount owed on the borrower's mortgage.

"That's amortization for you."

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?

Resident

______ managers live in and manage apartment buildings