SAE Investment Practice Quiz

The term "ad valorem" is Latin for ______. "According to value" "Adding strength" "By the year" "Improvised or made up"

"According to value"

Tabitha, an investor, owes $85,000 in taxes for the year. She has received a $50,000 tax credit for building a low-income apartment complex. After applying the credit, what amount will Tabitha owe the IRS? $35,000 $50,000 $60,000 $85,000

$35,000

What does "cash-on-cash return" mean? 1-A comparison of before-tax cash flow to cash invested 2-Making money hand over fist 3-Net income after taxes are deducted 4-Trading international currency

1

Jeannie is an investor interested in purchasing a warehouse. Two properties on opposite ends of town are fairly comparable in terms of price and features. Which of the following is a true statement? 1-Even though the properties are similar in price and features, the property taxes for the properties could vary a lot. 2-Jeannie doesn't need to be concerned about property tax rates. 3-Jeannie won't be able to deduct the property expense on an investment property. 4-Since the properties are both similar in price and features, property taxes for both should be roughly the same.

1-Even though the properties are similar in price and features, the property taxes for the properties could vary a lot.

Which of the following is a true statement about joint ventures? 1-Limited partners are not allowed to participate in the management of the partnership. 2-Only the general partner in a joint venture is responsible for the profits, losses and costs associated with the project. 3-Participants in a joint venture may hold title as joint tenants or tenants in common. 4-To participate in a joint venture, the parties must be corporations.

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

Who or which entity pays the PILOT fee for federal government-owned land? 1.Individuals or businesses that use the land 2.Taxpayers 3.The federal government 4.The local government where that land is located

3.The federal government

Over how many years is a commercial property depreciated? 27.5 years 29 years 39 years 40 years

39 years

Jeremy is looking at a building that has a total of 40,000 square feet, and an efficiency rate of 85%. How many square feet of non-productive space does the office building have? 2,667 28,000 34,000 6,000

6,000

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 conversion A fixer-upper A historic property A home targeted for rezoning

A historic property

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 buy and hold A fickle investor A fix and flip A reverse tax-deferred exchange

A reverse tax-deferred exchange

How are LLPs and LLCs taxed? As corporate entities As individuals As partnerships Each are taxed differently

As partnerships

Another name for a coupon bond, which is rarely issued anymore, is the _____bond. Bearer Corporate Mortgage Secured

Bearer

Who's the mortgagor in a mortgage? Borrower Lender Trustee Trustor

Borrower

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

Build to suit

What does "after tax cash flow" mean? Cash flow after considering income taxes Tax basis after deductions are applied Tax refund Tax windfall

Cash flow after considering income taxes

Anya, an owner of an older rental property, is ready to cash out. How would she realize the most profit? Ask her investment friends to buy her out Convert the rental property to condominium ownership Submit a request to the U.S. Department of the Interior to designate the property as historic Upgrade the property, and then turn it into a cooperative

Convert the rental property to condominium ownership

What do cooperative owners receive to demonstrate ownership? Corporation shares and a proprietary lease Deed House laws Mortgage

Corporation shares and a proprietary lease

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 HOA covenant Home warranty Listing agreement

Deed

In investments, each type of depreciation is defined by a particular event. Which of the following best describes a depreciation type and an event it's tied to? Economic depreciation and cost recovery Economic depreciation and physical deterioration Operating depreciation and taxing authority Tax depreciation and physical deterioration

Economic depreciation and physical deterioration

Your clients, the Nguyens, have signed a contract for deed to purchase a property. What rights do the Nguyens receive? Equitable and justifiable title Equitable and legal title Equitable and legal title and right of possession Equitable title and possession of the property

Equitable title and possession of the property

What phrase describes the amount that today's dollars grows to over time? An investment Future value Present value Principal

Future value

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? Graduated lease Gross lease Net lease Percentage lease

Gross lease

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

Hybrid REIT

Which of the following best describes the non-judicial foreclosure process? It may be used if the deed of trust includes a power-of-sale clause. It's an outdated process that's no longer used. It's the same as the judicial process, just called by a different name in different states. Regardless of how it sounds, the lender still has to go to court.

It may be used if the deed of trust includes a power-of-sale clause.

Which of the following organizations is temporary in nature? Corporation Joint venture LLC Partnership

Joint venture

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? Considering tenants' growth Determining capital expenditures Getting the right tenant mix Knowing the competition

Knowing the competition

In a sale-leaseback arrangement, property owners sell to investors and _______ the property. Cash out Lease Renovate Write off

Lease

Which of the following is a passive type of real estate investment? Buy and hold Fix and flip Limited partnership Wholesale

Limited partnership

Rescission can be a(n) ______ agreement to cancel a contract. Ill-advised Mutual Tenuous Unlawful

Mutual

What issue could an investor face in an anti-development community? Finding land to purchase Finding skilled laborers Obtaining a building permit Obtaining financing for the project

Obtaining a building permit

What type of lease is used most often with community shopping centers? Full service Graduated Net Percentage

Percentage

Which of the following is a true statement regarding property taxes and investments? 1-As much as 50% of the property taxes paid for investment properties are deductible for tax purposes. 2-Only the first $10,000 of property taxes for investments are deductible. 3-Property taxes for investment properties are fully deductible as a business expense. 4-Property taxes paid for investment properties aren't deductible for tax purposes.

Property taxes for investment properties are fully deductible as a business expense.

If a landlord takes away the tenant's right of _______, the tenant can claim constructive eviction and vacate the property with no further financial responsibility to the landlord. Acceptance Control Ownership Quiet enjoyment

Quiet enjoyment

When an investment property is sold, three taxes that apply are transfer tax, capital gains, and ______. Ordinary income tax Property tax Recaptured depreciation Tenant tax

Recaptured depreciation

The Tax Cuts and Jobs Act made changes to the AMT that effectively ______. Eliminated the AMT altogether Increased the number of people the tax affects Raised taxes on the wealthiest 5% of the population Reduced the number of people the tax affects

Reduced the number of people the tax affects

What is an optional arrangement on a sale-leaseback arrangement? Sale-leaseback buyback Sale-leaseback cash out Sale-leaseback donation Sale-leaseback sale

Sale-leaseback buyback

Which of the following is the simplest form of business structure where the owner is personally responsible for all business debts? LLC Partnership Sole proprietorship Syndicate

Sole proprietorship

Which corporate structure avoids double taxation? C corporation General corporation Limited corporation Subchapter S

Subchapter S

Which of the following trusts is created according to the terms of the will of a deceased person? Juvenile Living Tertiary Testamentary

Testamentary

What is maximum equity? An interest factor used to calculate the cost of debt service A subjective figure, based on the borrower's comfort level The maximum amount the borrower is willing/able to invest The maximum amount the lender is willing to loan

The maximum amount the borrower is willing/able to invest

Under a sole proprietorship form of business, ______. The owner assumes personal liability for all debts The owner is subject to double taxation The owner's personal assets are protected from business creditors' claims The owner works alone, without employees

The owner assumes personal liability for all debts

Deborah wants to invest in a community shopping center. What size trade area can she plan to service? Five- to 10-mile Four- to eight-mile Three- to six-mile Two- to four-mile

Three- to six-mile

Why are many middle-income cooperatives converted to condominiums? To avoid fair housing lawsuits To make resale easier To provide housing for rejected co-op applicants To take advantage of income tax shelters

To make resale easier

Which type of net lease sometimes requires a tenant to pay the interest payments on the lessor's mortgage on the property in addition to base rent? Double net Net Quadruple net Triple net

Triple net

Brandon wants to find out how many rental units are unoccupied in his area. Which market indicator provides this information? Inventory rates Price levels Sales volume Vacancy rates

Vacancy rates

When does a seller's market occur? When both supply and demand are high When both supply and demand are low When supply is high and demand is low When supply is low and demand is high

When supply is low and demand is high

Sondra thinks the new business contract she's signed with her business partner is valid. Both parties are legally competent, the purpose is a business transaction so it's a legal purpose, an offer was made and accepted, and a fee has been negotiated and documented. Which essential element of a valid contract has Sondra not yet considered? Whether consent was voluntary. Whether the contract has been translated into all possible languages. Whether the contract is in writing. Whether the parties are over 21.

Whether consent was voluntary.

Discounted cash flow analysis and annuity capitalization are two forms of what? Appraisal methods Cost approach appraisal methods Direct capitalization Yield capitalization

Yield capitalization

Which of the following is one benefit to business owners for leasing instead of buying real estate for their business? 1-Monthly rent is a tax deduction as a business expense. 2-Rental rates can include annual escalations based on market conditions. 3-The landlord holds the right of reversion at lease end. 4-The tenant may have little or limited control over what the property owner decides to do.

1-Monthly rent is a tax deduction as a business expense.

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

Acquisition

Which type of property tax is based on the value of the property? Ad valorem In rem Market value Special assessments

Ad valorem

In calculating estate taxes, lifetime taxable gifts are __________ to net value, and the tax is computed. Added Averaged, as compared Reduced Subtracted

Added

When a land trust expires, the trustee must either extend the trust term or sell the real estate and ______. Give all of the proceeds to the attorneys involved Give the proceeds to the beneficiary Give the proceeds to the trustor Retain the proceeds

Give the proceeds to the beneficiary

Kali invested in a large plot of land and planned to build a beautiful new subdivision. Imagine her dismay when a very large and vocal group from town picketed her site. What did Kali fail to do before she invested? Check out regulatory environment Obtain the necessary permits Verify that there was local support for the development Verify that utilities could be run to the new site

Verify that there was local support for the development

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? 1.Check out the regulatory environment 2.Obtain the necessary permits 3.Verify that there was local support for the development 4.Verify that utilities could be run to the new site

Verify that utilities could be run to the new site