Texas Real Estate Investment CE 30 Hours

Yanni is an investor who has just purchased a $300,000 building. Similar buildings are returning a rate of 7%. What can Yanni anticipate his annual net operating income to be? $18,700 $21,000 $30,000 $7,000

$21,000

Juan purchased a property for $420,000 and financed $336,000 of it. The assessed value of the property is $387,000. The property appraisal came in at $432,000. Which of these amounts is used in calculating the property tax? $336,000 $387,000 $420,000 $432,000

$387,000

Ezra has filed a fair housing discrimination complaint against an investor. HUD is investigating. Within how many days of receiving the complaint does HUD have to respond? 100 30 60 90

100 (Within 100 days of receiving the compliant, HUD will investigate and determine whether reasonable cause exists to bring a charge of illegal discrimination against the alleged offender, or it will dismiss the case.)

A property valued at $500,000 is returning a net annual income of $45,000. What is the cap rate for this investment? 12.5% 7.5% 8% 9%

9% (To compute cap rate, divide net annual income ($45,000) by the value ($500,000). In this case, it's 9%.)

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 home for their children A home for their parents A home to flip for cash A luxury home to purchase as an investment

A luxury home to purchase as an investment

What is used to verify, clarify, correct, or create an accurate legal description? A home inspection An address A satellite image A survey

A survey

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

Assemblage (This is the definition of assemblage. Plottage is the increase or decrease in land value that occurs when several parcels are combined into one large plot.)

Carmen's original one-year commercial lease has ended, and now, with her landlord's permission, she has gone into a month-to-month lease situation. What type of clause was in the original lease agreement that enabled this situation to occur? Automatic renewal Indemnity Option to renew Use

Automatic renewal (This situation is an example of an automatic renewal clause.)

Joaquim analyzed a potential opportunity and determined that if he invested $250,000 in the commercial property, he'd likely see a return of 12% on this investment. After several years, Joaquim is seeing a measly 2% return. What type of risk did he fall victim to? Mortgage principal Business risk Capital risk Financial risk Leverage risk

Business risk (Many investors put their money into a property with the hopes of seeing a certain return. Business risk is the risk that this return will not be met.)

A comparison of before-tax cash flow to cash invested is known as ______. After-tax cash flow Cash-on-cash return Income rate value Return on investment

Cash-on-cash return

Question 57 Jules just took over property management for a large apartment complex. What is one thing she should do immediately? Ask for the first payment up front. Collect all applicable electronic files. Complete a listing agreement for the complex. Write a letter thanking the owner.

Collect all applicable electronic files. (The owner should turn over all hard copy information Jules will need to manage the property effectively, as well as any electronic files.)

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 Getting the right tenant mix Knowing the competition Negotiating favorable leases

Considering growth for tenants

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 is hoping to purchase the building at a later date. Fiona wants to demonstrate how viable her business is. Fiona wants to reduce her base rent. The landlord is her business partner.

Fiona wants to reduce her base rent. (Retail tenants often opt for percentage leases to keep base rent low.)

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 Minor tax Overage tax Parental tax

Gift tax

Charlie, who owns and leases out a commercial building, pays taxes, maintenance, and insurance on the building. What type of lease agreement does Charlie have with his tenants? Gross Net Percentage Triple net

Gross (With gross leases, the landlord typically pays all expenses, such as taxes, maintenance, and insurance.)

Dean's new business venture is a software services firm where IT professionals handle programming and customer service tasks for a number of business clients. His employees all work at tables in an open office space. Dean most likely has a _______ lease for the office space.

Gross Loft Percentage Triple net (A loft lease is usually for a large open space that may have few amenities.)

When a real estate transaction is financed using a contract for deed, what advice should real estate agents give to their clients? Have an attorney review the contract. Have an institutional loan officer review the contract. It would be wiser to use a mortgage or deed of trust. Make sure a promissory note is attached to the deed.

Have an attorney review the contract.

Where are underground storage tanks primarily found? In newer homes In newer industrial sites In older homes and former industrial sites In parks and golf courses

In older homes and former industrial sites

In the months before the financial crisis beginning in 2007, what made collateralized debt obligations (CDOs) such an attractive investment? Increasing home prices gave them the perception of a safe, high-yield investment. It was a new type of investment that people wanted to experiment with. They were high-yield investments so most investors ignored the high risk associated with CDOs at the time. They were insured by the federal government.

Increasing home prices gave them the perception of a safe, high-yield investment. (Because investors and bankers assumed that property values would only continue to increase, CDOs appeared to be safe, high-yield investments.)

What's simple interest? Interest that's calculated based on the current principal of the loan amount multiplied by the interest rate Interest that's calculated based on the total amount of the original loan in addition to the amount calculated for each payment Interest that's calculated based on the total sales prince of the loan multiplied by the interest rate Interest that's reinvested into an account that then earns interest

Interest that's calculated based on the current principal of the loan amount multiplied by the interest rate (Simple interest is calculated by multiplying the principal times the interest rate.)

Amanda wants to know how long, on average, homes are staying on the market before they sell. What market indicator can give her this information? Inventory rates Price levels Sales volume Vacancy rates

Inventory Rates (Inventory rates indicate the number of months it takes to sell homes at the current rate of sales.)

Which of these is a dynamic risk? An accident involving a company delivery driver Fire damaging the building Market change Theft of business equipment

Market change

Which of the following is often evaluated in order to determine the purchasing power of consumers who live in the area? Census data Median income Property appraisals Property taxes

Median income (Median income is the income level that separates the top 50% from the bottom 50% in income.)

What is another name for a super-regional mall? Big lot mall Mega mall Monster mall Super store

Mega mall

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. Rental rates can include annual escalations based on market conditions. The landlord holds the right of reversion at lease end. The tenant may have little or limited control over what the property owner decides to do.

Monthly rent is a tax deduction as a business expense.

Edmund is a mortgage officer who closes loans. He is a ______________. Mortgage banker Mortgage broker Mortgage loan originator Underwriter

Mortgage banker (Only the mortgage banker can close and fund loans.)

To compute a monthly principal and interest payment, which of the following pieces of information do you need to know? Interest rate and loan amount Interest rate and term of the loan Monthly payment multiplier Mortgage loan value, annual percentage rate, loan term, and payment frequency

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

The building owner is going to be pleased. Keefer just signed another long-term tenant, and he remembered to build in stepped up rental rate increases. Which office building property manager's duty is this? Considering growth for tenants Determining capital expenditures Maintaining tenancy and profitability Negotiating favorable leases

Negotiating favorable leases (Because the owner won't want to be tied into rates that are under-market for years into the future, the property manager needs to negotiate longer-term leases that include stepped up increases in the leasing rates.)

Which of the following statements about non-compete clauses and community shopping center leases is true? A non-compete clause is included in a community shopping center lease if the tenant requests it. Non-compete clauses are included in leases that contain a cancellation clause. Non-compete clauses aren't used in community shopping center leases. Non-compete clauses are only included in leases with major tenants.

Non-compete clauses aren't used in community shopping center. (Because it's common to have similar businesses within a community shopping center, non-compete clauses aren't used.)

Your client, Gabriel, has invested in a rental property. He looks at his property's operating statement, tweaks the numbers based on his knowledge of the market, and re-works the statement. Gabriel has created a/an________________. Debt service statement Gross income statement Operating income statement Pro-forma statement

Pro-forma statement (Remember that Gabriel is changing the numbers of the operating statement based on his knowledge of the market.)

Beth, a condominium owner, wants to sell her condominium. What rule might apply before she is able to do this? Beth must allow the original developer the option to purchase her condominium when it's placed for sale. If Beth purchased after the builder or owner reached the non-owner occupancy maximum, she must wait 18 months to sell. If Beth purchased after the builder or owner reached the non-owner occupancy maximum, she must wait six months to sell. She must allow the board of directors the option to purchase the condominium when it's placed for sale, if the condominium agreement includes the right of first refusal.

She must allow the board of directors the option to purchase the condominium when it's placed for sale, if the condominium agreement includes the right of first refusal. (Many times, the board of directors will retain the right of first refusal on units within the condominium development.)

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. Bankruptcy Repayment plan Short sale Voluntary conveyance of deed

Short sale (A short sale is one that results in proceeds that aren't enough to cover both the amount the borrower owes to the lender and closing costs. A short sale requires lender approval.)

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

Under which of the following real estate submarkets would an investment in public storage facilities fall? Commercial Industrial Residential Special use

Special use (The special use submarket also includes entertainment venues (like theaters and theme parks), hotels and motels, golf courses, medical facilities, and mini warehouses.)

Which document is used to create a corporation? Bylaw Declaration Disclosure State of incorporation

State of incorporation

Which of the following terms is used to describe more land than is needed for the planned development, but not enough land to carve out for another purpose? Assemblage Excess land Plottage Surplus land

Surplus land (This is the definition of surplus land. Surplus land would be valued with the original parcel, and it may not add value to the land.)

A professional, on-site measurement of the lot lines and dimensions of a property is known as a(n) ______. Abstract Appraisal Inspection Survey

Survey

Which one of the following types of ownership termination allows each tenant to have a specific, divided portion (partition) of the property exclusively? Termination by division Termination of co-ownership by partition Termination of estate in severalty Termination of joint tenancies

Termination of co-ownership by partition (Termination of tenancy in common by partition allows each tenant to have a specific, divided portion of the property exclusively. If the property can't be divided, the court may rule that the property be sold and the proceeds divided by the tenants.)

As responsibility for the property is transferred, the manager should pay special attention to ______. A startup cash fund Other sources of income besides rental The accounts payable ledger The mortgage payments

The accounts payable ledger (The manager should pay close attention to the accounts payable ledger, and the owner and the manager need to agree in the management agreement on each party's specific liabilities for expenses.)

The property management agreement cements what relationship between the property manager and the owner? The agency relationship The landlord-tenant relationship The owner relationship The service relationship

The agency relationship (Like other agency agreements, the property management agreement details the terms of "employment" between the property manager (agent) and the owner (client).)

Which of the following best defines capitalization rate? The expected rate of return on investment The rate at which assets depreciate over time The rate of capital recapture The value of a business as an investment

The expected rate of return on investment (A capitalization rate is the expected rate of return on an investment and is based on the performance of comparable properties.)

Which of these would void a deed intended to convey property? The grantee is not mentally competent. The grantee's signature is not acknowledged. The grantor is not mentally competent. The transfer includes no monetary consideration.

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 deed of reconveyance and returns the note to the borrower. The lender executes and records a satisfaction of mortgage and returns the note to the borrower. The lender files for a release of lien and returns the note to the borrower. The lender returns the note and mortgage to the borrower.

The lender executes and records a satisfaction of mortgage and returns the note to the borrower. (When a borrower has paid the loan in full, it's the lender's responsibility to execute and record a satisfaction of mortgage.)

Jake and Eddie have a promissory note agreement that states that Jake will pay back the money he owes Eddie, with interest. Who's required to sign the note? Both the maker and the payee The maker only The maker, the payee, and the trustee The payee only

The maker only (The maker (borrower) of the note is the only party who is required to sign it, although the payee (lender) frequently signs, as well.

The capitalization process uses a capitalization rate, which is based on what? Estimates of future sales Last year's sales The performance of comparable properties The stock market

The performance of comparable properties (The capitalization rate is based on the performance of comparable properties. It's the expected rate of return on an investment and can be calculated using the formula of: NOI ÷ V = R, or net operating income ÷ value = rate.)

Which of the following is a true statement about when a promissory note is sold? Promissory notes cannot be sold. The note must be notarized. The promissory note is endorsed to the new owner of the loan. When the note is sold, the attached security instrument is assigned to the lender.

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

Short-term capital gains are taxed at ______. A rate of as much as 15% A rate of as much as 20% A rate of as much as 3.8% The taxpayer's marginal tax rate

The taxpayer's marginal tax rate (Short-term capital gains are taxed at the taxpayer's marginal tax rate.)

During the option period to renew a lease, who determines whether the option will be exercised? Either the landlord or the tenant can make the decision. It must be mutually agreed to by both the landlord and the tenant. The landlord makes the decision. The tenant makes the decision.

The tenant makes the decision. (When there's an option period in play, the lease can be renewed at the sole discretion of the tenant. The landlord has no say in whether the option will be exercised (or not).)

In the real estate market, when supply exceeds demand, it means what? There are an equal amount of homes for sale and buyers to purchase them. There are more buyers than available homes and prices will be higher. There are more homes than buyers and prices will be higher. There are more homes than buyers and prices will be lower.

There are more homes than buyers and prices will be lower.

Which of the following is a true statement about the relationship between capitalization rate and value? Capitalization rate and value are the same thing. There is an inverse relationship between the two. When capitalization rate goes down, so does value. When capitalization rate goes up, so does value.

There is an inverse relationship between the two.

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

"According to value"

Cheryl bought her home three years ago for $217,000. Assuming her home appreciated at the 3% rate typical of her current market, how much is her home worth now? $223,705.30 $230,416.46 $237,121.76 $247,380.00

$237,121.76

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 __________. $100,000 $16,000 $37,500 $65,000

$37,500 (The judge may award damages to the victim and impose monetary penalties against the violator for $16,000 for a first offense, up to $37,500 for a second offense within five years, and up to $65,000 for a third violation within seven years.)

Which of the following is considered a plex? A building with two dwelling units A condo An apartment building A townhome

A building with two dwelling units

Successful investors should treat investing as ______. A business that requires planning, time, organization, and expertise A game, like gambling, but without rules, where the motto is, "The end justifies the means" A hobby, so if any money is lost, they don't lose heart and drop out of the game A passion into which they completely throw themselves, and rely on their gut instincts

A business that requires planning, time, organization, and expertise

What's a legal agreement or promise made between two parties? A consideration A covenant A handshake A negotiation

A covenant

What type of loan is a carry-back loan? A conventional loan A junior loan An income property loan A senior loan

A junior loan (A carry-back loan is a form of junior loan.)

Angus is willing to pay the owner a bonus to get a particular location in the neighborhood shopping center for his business. What location does Angus want for his store? A spot in the center The building next to the major tenant The end closest to the main entrance The end closest to the main exit

A spot in the center (The center is the prime spot in a neighborhood shopping center.)

In order to promote tenant retention, Misty always tries to be ______. Absent As hands-off as possible A visible presence Invisible

A visible presence

When modifying office buildings to meet accessibility requirements, owners should focus on these four areas: accessible approach and entrance, ______, access to restrooms, and any other necessary measures, such as access to public amenities. Access to goods and services Carpeted halls and stairways Climate control Reduced noise levels

Access to goods and services

Which of the following could apply to closing costs for an investment property? Closing costs are added to the cost basis, are sometimes deductible in the year paid, and are often amortized over the life of the loan. Question 29 Which of the following statements about non-compete clauses and community shopping center leases is true? Amortized over 17 years Amortized over the life of the loan Never deductible in the year they're paid Subtracted from the cost basis

Amortized over the life of the loan (Closing costs are added to the cost basis, are sometimes deductible in the year paid, and are often amortized over the life of the loan.)

Which of the following statements best describes the three-property rule as it relates to tax-deferred exchanges? An investor can exchange no more than three properties per exchange. An investor can exchange no more than three properties per year. 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. An investor must own at least three properties to qualify for a tax-deferred exchange.

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. (The three-property rule says that an investor can identify up to three replacement properties and, in this situation, fair market value doesn't matter, provided the investor meets the debt load requirement.)

Which of the following investors is exempt from fair housing laws? An investor who owns fewer than four single-family homes and lives in one of the investment properties An investor who owns fewer than three single-family homes An investor who owns more than six single-family homes and handles the selling of the properties himself An investor who uses a real estate licensee to sell her investment properties

An investor who owns fewer than four single-family homes and lives in one of the investment properties (An investor who owns three or fewer single-family homes, and who doesn't use real estate licensees to assist in the sale of the investment properties is exempt from fair housing laws.)

What is dynamic risk? An insurable business risk that includes insuring for accident liability, fire, theft, and vandalism An uninsurable business risk resulting from economic, tax, and market changes The risk that an investor cannot secure financing at an affordable rate The risk that is directly related to leverage

An uninsurable business risk resulting from economic, tax, and market changes (Dynamic risks are those business risks that cannot be lessened with insurance.)

What does a land banker bank on? Appreciation Buyer preferences Employment rates Market dynamics

Appreciation

Why are credit unions able to compete with large commercial banks? As non-profits, they have fewer regulations, which translates to greater lending flexibility. They know how to get around regulations and red tape. They're smaller, so they don't get into hot water with regulators as often. They've grown so significantly that they're virtually the same size as most commercial banks.

As non-profits, they have fewer regulations, which translates to greater lending flexibility. (Credit unions are competitive with large commercial banks because they have non-profit status, which means fewer regulations-which translates to greater flexibility in lending.)

Which of the following has always had a significant impact on housing demand? Availability or lack of employment Choice of building materials Number of nearby restaurants Popularity of the local mayor

Availability or lack of employment (Unemployed buyers can't qualify for a loan, and most home purchases are financed.)

There are many advantages to holding property within a trust. One of the most important advantages is that some trusts ______. Avoid probate Need not be reviewed by an attorney Require probate Typically take years to sort out

Avoid probate

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

Borrower (Plain English for the mortgagor is "borrower." This is because the borrower establishes the mortgage as a security instrument for the loan.)

Which of the following statements is true regarding community property rights and property ownership? All property purchased before the marriage and owned individually must be sold. The profits are divided equally between the partners. All property purchased before the marriage automatically comes under the community property rights requirement. Any property purchased before the marriage must have the spouse as the beneficiary should the owning partner die. Both partners may own other properties purchased before the marriage separately (in severalty), but any properties purchased during their marriage are owned equally.

Both partners may own other properties purchased before the marriage separately (in severalty), but any properties purchased during their marriage are owned equally.

Marcie bought a duplex, lived in one half, and rented out the other half. This is an example of what type of investing? Termination of joint tenancies Buy and hold Fix and flip Passive Wholesaling

Buy and hold (This is buy and hold, which is a long-term, active form of investing. Although Marcie lives in one half, she is still an active investor in the duplex.)

Sam's kids talked him into putting up the basketball hoop that their grandparents got them for Christmas. On a quiet Saturday afternoon, Sam is busy nailing the backboard to the front of their garage facing the street when one of the officers of the homeowners association walks by. "I'm so sorry," she says, "but you'll have to take that down. Basketball hoops in direct view of the street are prohibited." What is in place in Sam's subdivision that would prohibit this? CC&Rs Deed warranty Law Regulation

CC&Rs

The risk that an investor cannot secure financing at an affordable rate is called ______ risk. Business Capital Financial Leverage

Capital (A purchase can be put in jeopardy if an investor cannot secure the financing needed at an affordable rate. This capital risk could make the purchase unattractive or more expensive than first analyzed and no longer a pursuable investment opportunity.)

Which class of office building is aimed at tenants requiring functional space at below-average rents for the area? Beyond class category Class A Class B Class C

Class C

The regulatory environment, the availability of utilities, the permitting process, and the _____________________ can be barriers to completing a land development project. Community's attitude toward development Price of oil and gas Quality of building materials Transportation infrastructure

Community's attitude toward development

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 Condemnation Contingency Counter-offer

Conciliation

Which of the following statements about trends in condominium ownership is true? Condominium ownership has to be a one-to-one relationship. Condominiums are frequently used as timeshares. Condo ownership is moving away from fee simple and toward estate for years. Fewer buyers are interested in owning a condo.

Condominiums are frequently used as timeshares. (There's nothing that says a condominium ownership has to be a one-to-one relationship. Condo timeshare swaps are common.)

Chadwick is a developer considering purchasing a large piece of unimproved land for a subdivision development. What should he do before committing to the project? Apply for financing. Conduct a feasibility study. Phone a friend. Start marketing the property to see if there are buyers.

Conduct a feasibility study.

Connor was the seller and Duke was the buyer when Connor sold his property. Who conveyed the title? Connor, as grantee Connor, as grantor Duke, as grantor The title clerk for the county in which the property is located

Connor, as grantor (The grantor (usually the seller) conveys title. The grantee (buyer) accepts and acknowledges receipt of title.)

Carlton, an owner of several retail spaces and one apartment building, is ready to sell his investments. He thinks the most lucrative approach would be to change his current properties into condominiums. What is this investment opportunity known as?

Conversion

Mike and Ike set up a real estate company. Mike, Ike, and Spike each own a portion of the stock. Mike & Ike Realty is a legal entity of its own. Mike is involved in a ______. Corporation Limited liability company Partnership Sole proprietorship

Corporation

Spring has sprung, and you need to hire someone to clean out the flower beds at an apartment complex. What type of maintenance will you be having performed? Corrective Custodial Preventative Tenant improvements

Custodial

If TVC has $450,000 in assets, $75,000 in debt, and $330,000 in equity, which of these ratios are correct? Debt-to-Asset, 17%; Debt-to-Equity, 23%, Debt-to-Capital, 19% Debt-to-Asset, 17%; Debt-to-Equity, 23%, Debt-to-Capital, 35% Debt-to-Asset, 17%; Debt-to-Equity, 26%, Debt-to-Capital, 22% Debt-to-Asset, 19%; Debt-to-Equity, 17%, Debt-to-Capital, 23%

Debt-to-Asset, 17%; Debt-to-Equity, 23%, Debt-to-Capital, 19%

Rather than be foreclosed on, Jarod turned his deed over to his bank. This is called a ______. Bankruptcy Deed in lieu Judgement lien Short sale

Deed in lieu

Price levels are an indicator of _______. Demand Inventory rates New building permits Supply

Demand (Demand and price move together in the marketplace, so price levels are good indicators of demand.)

Which of the following is a form of commercial bank revenue related to mortgage financing? 401(k)s Demand deposits HELOCs IRAs

Demand deposits (Commercial banks derive most of their funds for mortgage lending from demand deposits.)

Investors may be allowed to deduct operating expenses, real estate taxes, mortgage interest, and what else? Supply Appreciation Depreciation Land appreciation Mortgage principal

Depreciation (Allowable deductibles include depreciation, operating expenses, real estate taxes, and mortgage interest.)

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 Getting the right tenant mix Knowing the competition Negotiating favorable leases

Determining capital expenditures

In which of the following scenarios is impossibility of contract performance occurring? Both parties fully meet the terms of the contract. Due to circumstances beyond their control, the parties can't legally or practically do what they've agreed to do. One or both parties have completed only a portion of the terms agreed to in the contract. One party didn't meet the terms of the contract in the specified timeframe and is being required to do exactly what was agreed to in the contract.

Due to circumstances beyond their control, the parties can't legally or practically do what they've agreed to do.

Economic, tax, and market changes are types of _______ risk. Capital Dynamic Environmental Static

Dynamic (Dynamic risks are those business risks that cannot be lessened with insurance. This includes economic, tax, and market changes.)

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 (Economic depreciation is often tied to physical deterioration.)

Investors can determine the relative strength of the job market by evaluating the _____________. Employment rate Gross domestic product Number of homes on the market Types of businesses in the area

Employment rate (The employment rate is often evaluated for previous years and projected into the future by also considering the prominent industries in the market area.)

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 (When a contract for the sale of land is executed, equitable title passes to the buyer. When the conditions on the sale contract have been met, legal title passes to the buyer with the deed.)

Which REIT type specializes in owning certain building types, such as apartments or office buildings? Commercial cap Equity REMTs Tax-deferred

Equity

Which type of deed is considered a court-ordered deed? Bargain and sale deed Executor's deed Full covenant and warranty deed Quitclaim deed

Executor's deed (An executor's deed, sheriff's deed, and many other deed types are all examples of court-ordered deeds, or deeds executed to a court order.)

What happens during an abatement period? Existing properties are charged a higher amount on the total improved value. Existing properties are charged the usual property tax on the property's pre- improvement value only. New properties pay a higher property tax rate during the abatement period. Rates rise at a uniform level, not to exceed an additional 25% in property taxes owed.

Existing properties are charged the usual property tax on the property's pre- improvement value only. (One outcome of a tax abatement is that existing properties will pay property tax only on pre- improvement value. Any increase in the assessed value is temporarily halted.)

The risk that is directly related to leverage is called ______ risk. Business Capital Financial Leverage

Financial (The more money an investor leverages (or borrows), the greater the financial risk.)

Brandy is going to purchase a strip mall. She is trying to determine exactly how much to borrow for this purchase. She understands that the more she borrows, the greater her risk. What type of risk is she evaluating? Business risk Capital risk Dynamic risk Financial risk

Financial risk

After spending three years gutting and renovating her 1925 American Foursquare into a local showplace, Evette buys another rundown property on her street as an investment. Given her experience, which of the following strategies is her most likely choice? Buy and hold Fix and flip Limited partnership Wholesaling

Fix and flip (Given her experience and skills, Evonne is most likely to buy fixer-uppers with the intention of reselling them for a profit.)

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) Foreign Investor Real Estate Investment Tax (FIRE-IT) Foreign Real Estate Tax Withholding Act (FRETWA) Tax Withholding for Foreign Holding Act (TWFHA)

Foreign Investment in Real Estate Property Tax Act (FIRPTA)

Jenner purchased his first home, to which he'll have access forever, as far as he knows. Jenner owns a(n) ______. Estate for years Freehold estate Leasehold estate Ownership estate

Freehold estate (A freehold estate implies ownership for an unlimited amount of time-the "free" refers to the ownership agreement being free of an end date.)

Which payment plan consists of the borrower paying a constant amount made up of principal and interest on a periodic basis (usually monthly)? The lender returns the note and mortgage to the borrower. Flexible payment plan Fully amortized loan payment plan Interest-only payment plan Partially amortized payment plan

Fully amortized loan payment plan (Over time, more of the payment goes toward the principal, and less toward the interest. By the end of the loan, the payment goes almost entirely toward the loan's principal.)

Which type of tenant typically makes up half of a regional shopping center's tenant mix? Clothing and shoe stores Dry goods shops General merchandise stores Service and related businesses

General merchandise stores (A typical tenant mix for a regional shopping center is 50% general merchandise stores, 25% service and related businesses, 15% clothing and shoe stores, and approximately 10% dry goods shops.)

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 (When a land trust term expires, the trustee must either extend the trust term or sell the real estate and provide the proceeds to the beneficiary.)

In order to produce useful and functional reports, a property manager should understand a property owner's ______. Budget Goals Leasing strategy Risk tolerance

Goals (The number and types of reports a property manager provides to an owner should be directly influenced by the property owner's specific goals for the property.)

Which of the following individuals would be a competent party to a contract? Byron, a 17-year-old MENSA member Claudia, a 37-year-old in-patient receiving treatment for schizophrenia Graciella, a 28-year-old unemployed parolee Norman, a 40-year-old heroin addict

Graciella, a 28-year-old unemployed parolee

Brandon is interested in purchasing a piece of property, but before doing so, he'd like to verify the accuracy of the legal description. Which of these options will accomplish this? Having a home inspection performed Having an appraisal performed Having a survey conducted Looking up the property on Google

Having a survey conducted

Honey is the seller in an installment sale of a residential property. She is paying her capital gains tax through installment sale deferment, and her installment obligations at the end of the tax year will be less than $5 million. Given her situation, which of the following statements is true? Honey is a dealer. Honey may be subject to tax on gains at the ordinary income rate at the time of sale. Honey must pay the capital gains tax in full at sales time. Honey will only pay taxes proportionate to the gain collected each year.

Honey will only pay taxes proportionate to the gain collected each year. (Through installment sale deferment, Honey will pay taxes proportionate to the gain collected each year. Her installment obligations will be less than $5 million, so she won't be subject to taxes on gains at the ordinary income rate at the time of sale.)

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. It's a form of ownership used for property that is made available for public use, such as parks or streets. It's an option for married couples in any state to take ownership of real estate so that if one spouse dies, the property may not be transferred away from a surviving spouse. It's the federal law that allows the government to designate a married couple's property as property owned by the community at large.

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.

Capitalization is the process of converting ______. Capital to equity Income to value Sales to income Value to income

Income to value

Adjustable rate mortgage interest rates are often linked with a recognized ______. Bank Government entity Index Public figure

Index (ARM interest rates are often linked with a recognized index, such as U.S. Treasury securities.)

Calculating the return on investment can be a part of determining the ______. Assessed value Investment value List price Market value

Investment value (Calculating the return on investment can be a part of determining the investment value.)

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. It prohibits solicitation within the building. It prohibits tenants from having guests who stay over. It requires the tenant to keep the noise level down during sleeping hours.

It assures tenants they won't be evicted if they adhere to lease terms. (This clause puts tenants on notice that they can stay—their possession of the unit won't be disturbed—provided they abide by the terms of the lease.)

What does income shelter mean? It is a type of bank account that investors use to save money. It means that the income received cannot be sheltered from taxation. It means that the income received is sheltered from taxation. It means that the income received is taxed at a higher rate.

It means that the income received is sheltered from taxation. (Income shelter means that the income received is sheltered from taxation. Not all of it, not permanently, and not in every case, but the opportunity is there.)

Virginia is finally living her dream—she bought a coffeehouse in a charming college town. After she closed on it, her attorney sat down with her to discuss various business licensing and legal requirements she'll have to meet. Virginia was surprised to learn that her five-table establishment is affected by the Americans with Disabilities Act. What must be true about the coffeehouse? It includes at least 400 square feet of public space. It's a commercial enterprise that's open to the public. It sits in a city center. It was built after 1978.

It's a commercial enterprise that's open to the public.

What is it about strip stores that makes them appealing to small investors? Commercial tenants tend to prefer short-term leases, which means an opportunity to increase rents more often. It's easier to secure a mortgage loan for a small commercial project. The building owners don't have to cater to the needs of a variety of tenants. The buildings are located away from busy thoroughfares.

It's easier to secure a mortgage loan for a small commercial project. (Small investors like strip store buildings, because commercial tenants, unlike residential tenants, tend to agree to longer leases and require less management. Also, mortgage loans are relatively easy to secure.)

When something is evaluated according to ______, this is called finding the value on an ad valorem basis. Its cost to build Its estimate Its value The majority

Its value

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

Joint venture

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? Arbitration Deed in lieu of foreclosure Judicial foreclosure Non-judicial foreclosure

Judicial foreclosure

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 (To know the competition, the property manager must figure out what the office building has to offer regarding location and amenities compared to the competition to attract and keep the right tenants.)

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? C Corporation Limited partnership LLP S corporation

LLP (Both limited and general partnerships must have at least one general partner. LLCs have no general partners. The owners are referred to as members.)

Which of the following is a disadvantage of investing in residential real estate, including a single-family home rentals? Ability to depreciate an appreciating asset Landlord responsibilities and tenant relationships No periods of vacancy Positive cash flow

Landlord responsibilities and tenant relationships

Which type of property lends itself more to farming and agriculture? Heavily wooded acreage on rocky soil Large, flat acreage properties in rural communities Narrow mountain valleys Steeply sloped hillside properties near town

Large, flat acreage properties in rural communities

When they don't want to sell just yet, investors in single lots can sometimes gain value by _______________. Holding on to the investment for at least 10 years Installing a built-in swimming pool Leasing Subdividing

Leasing (By leasing their single lot, investors can sometimes gain value.)

Because real estate offers __________, investors can sometimes make a 100% return on their investment. Appreciation Leveraging opportunities Personal control Tax flexibility

Leveraging opportunities

Private loan companies may place a ______ on the property for which the loan is being taken. Lien Lock Moratorium Secondary loan

Lien

In this type of partnership, non-general partners are limited in their authority. Liability partnership Limited partnership LLC partnership S-corporation partnership

Limited Partnership (In a limited partnership, limited partners have less risk and less authority.)

Which of the following is a disadvantage of real estate investment based on the fact that it may be more difficult to sell quickly without a loss of capital? Level of risk Liquidity Profitability Tax flexibility

Liquidity (Real estate investments are not liquid. This is a disadvantage of investing in real estate.)

Martin placed all of his real estate investments in a trust, and the proceeds are distributed through the trust to his son Nathan. Martin still manages the properties indirectly, and Nathan currently benefits, as he's past the required beneficiary age of 18. What type of trust is this? Indirect trust Living trust Probate trust Testamentary trust

Living trust (Because Martin is still living, this is a living trust.)

The law of agency requires Westin, a property manager, to _______. Act in his own interest when managing the property Deposit tenant funds into his business account Handle renters in default however he sees fit Maintain confidentiality and loyalty to the owner's best interests

Maintain confidentiality and loyalty to the owner's best interests (Westin has a fiduciary relationship to the owner of the property and must maintain confidentiality and loyalty to the owner's best interests. He is committing to put the property owner's interests first, even above his own interests.)

What is the name of the tenant group that, along with the property manager, is responsible for regional shopping center promotional activities? Association of tenants Mall events planning board Merchants' association Tenant planning board

Merchants' association (Regional shopping centers all have active merchants' associations to which all tenants must belong, under the terms of their leases. This association (along with the property manager) is charged with handling promotional activities.)

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 ______. Actual eviction Eviction Expiration Mutual agreement

Mutual agreement

Which of the following statements best describes a foreclosure by advertisement? Notification of pending auction, public auction, notice of eviction Notification of pending auction, repossession, notice of eviction Petition for legal ownership, opportunity to redeem property, notice of eviction if property is not redeemed Petition to enter, repossession, notice of eviction

Notification of pending auction, public auction, notice of eviction (In foreclosure by advertisement, the borrower is notified of the default and pending public auction of the property. After the auction takes place, the winning bidder has to petition the court for a notice of eviction.)

Which document includes the size of units, construction, floor plans, amenities, recreation facilities, make and model of appliances, windows, how the landscaping of the property will be maintained, and the actual land on which a condominium building is situated? Bylaws Declaration Marketing brochure Offering plan

Offering plan (These are the required elements of the offering plan.)

Which type of real estate property can be divided into classes A, B, and C? Industrial Mixed-use Office buildings Retail

Office buildings (Office buildings can be divided into Class A, which is prestigious, Class B, which is fair to good, or Class C, which is functional with below-average rent.)

Which of the following items does the IRS consider personal tangible property? A building A swimming pool Office equipment Paved parking areas

Office equipment

What is one advantage neighborhood shopping centers have over strip stores? Better clientele Locations near busy thoroughfares Lower prices One central, off-street parking lot

One central, off-street parking lot (The one central, off-street parking lot found in neighborhood shopping centers is a major draw when compared to the often-inadequate parking for strip stores, which rely primarily on available on-street, curbside parking.)

A(n) ______ budget helps property managers maximize profitability and avoid unforeseen major expenses and repairs. Cash reserve Expense Operating Stabilized

Operating

Shawn is a property manager preparing a budget for an apartment complex owner. It includes income and expenses for the property's ongoing needs. What type of budget is he preparing? Capital reserve budget Operating budget Property management budget Stabilized budget

Operating budget (The operating budget is an annual budget that includes income and expenses for the operation of a property.)

Rufus scheduled a local business to come take a look at the roof and the siding on the building. Last week, a landscaping company was on the property. Which commercial property manager duty is Rufus performing? Collecting rent Leasing the property Overseeing maintenance Qualifying potential tenants

Overseeing maintenance

Which phase of the investment cycle includes deductions for mortgage interest and property tax? Acquisition Ownership Reversion Sale

Ownership (This is the ownership phase.)

With which type of lease do tenants pay their base rent plus a percentage of their gross sales? Full service Graduated Net Percentage

Percentage

Which of the following statements about topography in land investments is true? Contours impact development costs, but soil composition doesn't. Physical features of the land factor into development costs. Physical features of the land have little to no impact on development costs. The impact of physical features to development costs must be considered when looking at agriculture properties, but not for commercial properties.

Physical features of the land factor into development costs.

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

Preventive

Which of these terms can be defined as what a buyer has paid for a property and what the seller has accepted? Appraisal Cost Price Value

Price (Price is the actual amount that a buyer pays for a property. It may be the same as the market value, or it may not.)

When it comes to a property's highest and best use, which of the following applies? Ability to be leveraged Liquidity Profitability Rebuilding cost

Profitability (Highest and best use describes a property's most profitable use that's both legal (conforms to zoning) and economically feasible.)

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? Decide whether or not there will be an office condo owners association Determine what type of ownership interest each office condo owner will hold Find new offices in another building for the existing tenants Promote the sale of the condominium offices

Promote the sale of the condominium offices (Roger needs to work on getting the individual office condo spaces sold and the sales contracts closed.)

Before a purchase contract can be signed for land that is being sold across state lines, what must developers provide to buyers? Building permit Certificate of Occupancy City certification Property report

Property report

What does REIT stand for? Real Estate International Trust Real Estate Internet Tax Real Estate Investment Tax Real Estate Investment Trust

Real Estate Investment Trust

What does a mortgage real estate investment trust invest in? Lease contracts Personal property Real estate debt Real estate property

Real estate debt (Mortgage REITs don't buy properties, but instead invest in real estate debt, primarily commercial and residential mortgage-backed securities.)

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 (Three taxes take effect when an investment property is sold. The transfer tax is assessed at the time of the sale. Capital gains tax and recaptured depreciation will apply on the investor's income tax return.)

Cheng is selling his property to Jericho. What's the best method Jericho can use to ensure his interest in the property? Ensure that Cheng signs the deed. Ensure that he signs the deed. Purchase title insurance. Record the deed in his name.

Record the deed in his name. (Recording provides constructive notice of Jericho's purchase. Failure to record makes it possible for others to record interests in the future. Title insurance protects Jericho from claims from the past, but the title search limits that concern.)

Which of these property owners is eligible to take advantage of a 1031 tax-deferred exchange? Ann owns a single-family home, but rents it out to a coworker while she's on a two-year military tour. Chanel sells an investment property. A year later, she finds an almost identical investment property to purchase, and does so. Reggie sells an apartment complex and purchases a new complex a month later in a different part of the city. Sigmund sells his single-family home and purchases a new home for his family to reside in.

Reggie sells an apartment complex and purchases a new complex a month later in a different part of the city. (Reggie is the only owner using the property for investment or business purposes who's identified the property within the required deadline for a tax-deferred exchange.)

Which of the following commercial properties are commonly referred to as malls? Factory outlets Neighborhood shopping centers Regional shopping centers Strip stores

Regional shopping centers (Regional shopping centers (also known as malls) are usually enclosed, with stores facing inward and connected by a common walkway.)

When a property's value is dropping because the neighboring property's yard is filled with trash, it's an example of ______. Depreciation Progression Regression Substitution

Regression (When the value of a higher-quality property is reduced by an adjacent lower-quality property, this is called regression.)

______ managers live in and manage apartment buildings. Community Concierge House Resident

Resident

As a(n) ______ property manager, you know there's a lot more turnover in your area of expertise. Office Real estate development Residential Retail

Residential

Bridget has an investment portfolio that includes an equity REIT. Which of these is most likely to be part of the REIT's investment? Mortgages secured by commercial properties Mortgages secured by residential properties Retail shopping centers Undeveloped land parcels

Retail shopping centers (Equity REITs invest in income-producing property, such as a retail shopping center. Undeveloped land isn't likely to produce income, and equity REITs don't invest in mortgage debt. That's the role of mortgage REITs.)

Which investment cycle is an investor in when there is depreciated basis and tax-deferral through 1031 exchanges? Acquisition Depreciation Ownership Reversion

Reversion (This is the reversion investment cycle.)

Which market indicator can tell you the number of houses sold over a period of time? Inventory rates New building permits Price levels Sales volume

Sales volume

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? Buyer's market Imbalanced market Seller's market Stagnant market

Seller's market (When demand exceeds supply, prices go up, and it's a seller's market. Just remember that sellers like high prices, so when prices are high, it's a seller's market.)

Ray is in a bit of a predicament. He owes more on his mortgage than his property is worth, but can no longer afford the payments. He receives permission from his lender to sell the property for less than what he owes. What is this an example of? Bankruptcy Repayment plan Short sale Voluntary conveyance of deed

Short sale (A short sale is one that results in proceeds that aren't enough to cover both the amount the borrower owes to the lender and closing costs. A short sale requires lender approval.)

When both supply and demand increase, what tends to happen to prices? Become volatile Decrease Increase Stay the same

Stay the same (Remember, there are many factors that impact supply and demand.)

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

Subchapter S (By being taxed as a partnership, Subchapter S avoids taxation at both the corporate and individual levels.)

If a landlord wants to notify a tenant that the leased property is subject to a mortgage, what clause would be included in the lease? Mortgage clause Subjective clause Subordination clause Use clause

Subordination clause

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 of the following could happen? Sam and Monique will forfeit their ownership rights to the site and will be forced to foreclose. The EPA can seek damages in court for up to three times the actual cleanup costs. The EPA will have to find the former owners of the site and bill them. The EPA will have to fund the cleanup itself.

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

Which of the following is a true statement regarding current trends in condominiums? Condominium associations are losing membership. Condos tend to be the last property type to lose value in a down market. The condominium model is being used for commercial properties. There is a move away from condominium ownership.

The condominium model is being (The condominium model is being used for single-family homes and commercial properties.)

Which of the following statements is true about constructive eviction? The court may award damages to the tenants. The court may order the vacated tenants to pay monetary damages to the landlord. The landlord can shut off the power to the unit, thereby forcing the tenant out. The tenants who abandoned the property may never legally re-enter the premises.

The court may award damages to the tenants.

Which of these statements accurately represents one of the required elements in a deed? The deed includes an act of conveyance. The grantee must be legally competent. The grantee must be of legal age. The grantee must sign the deed and provide consideration.

The deed includes an act of conveyance.

Commercial leases may contain an automatic renewal clause. If this is the case, what happens after the lease's original term has come to an end? The lease continues on a month-to-month basis. The lease is automatically renewed for the term stated in the original lease agreement. The tenant is given a window of opportunity in which to buy the rental property. The tenant is given one month to negotiate a new lease with the landlord.

The lease continues on a month-to-month basis.

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? Bonnie's mortgage loan interest will increase. Bonnie won't be allowed to pay off her loan early. The lender can place Bonnie's loan in default. The lender can sue Bonnie.

The lender can place Bonnie's loan in default.

Janie and Sam are newly married and are looking for their first home. They're fortunate that Janie's mom set aside some money to help with this purchase. Janie's mom says it's a loan, though, and they will have to pay her back. What's wrong with this? Janie and Sam will have to account for the additional income on their taxes. Taxes will be at least 50% higher if the money is loaned instead of gifted. The IRS doesn't allow loans from individuals. The loan will go against their debt load.

The loan will go against their debt load. (The problem here is that the money from Janie's mom can't be a loan. It must be given and treated as a gift, or it will impact Janie's debt load.)

Marcy wants to collect economic data about businesses and local growth and decline. Where can she go to find this data? Internet Local chamber of commerce Local historical society Public library

The local chamber of commerce will have this economic data.

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 (Maximum equity is the amount the borrower is willing/able to invest. This is determined by dividing the cash flow by the desired rate of return.)

What's market value? A figure used to calculate the amount of real property tax The amount of property value to which the tax rate is applied The amount the local government applies to individual parcels of real estate that will benefit from road or other infrastructure improvements The probable sales price if the property were listed today and a willing seller and buyer were involved in the transfer of ownership

The probable sales price if the property were listed today and a willing seller and buyer were involved in the transfer of ownership (Market value is the probable sales price of a property if the property were sold under normal market conditions.)

Ad valorem taxes are based on what? The property's assessed value The property's market value The property's mortgage value The property's square footage

The property's assessed value

Which term refers to the tenant's right to live in a rental property without harassment or trespass by the landlord? The right of quiet enjoyment The right to live The right to peace The right to possession

The right of quiet enjoyment

What is capital risk? The risk that an investor cannot secure financing at an affordable rate The risk that is directly related to leverage The risk that the property has a bad location The risk that the required return on investor capital will not be met

The risk that an investor cannot secure financing at an affordable rate (A purchase can be put in jeopardy if an investor cannot secure the financing needed at an affordable rate. This capital risk could make the purchase unattractive or more expensive than first analyzed and no longer a pursuable investment opportunity.)

In the real estate market, when demand exceeds supply, it means what? There are an equal amount of homes for sale and buyers to purchase them. There are more buyers than available homes and prices will be higher. There are more homes than buyers and prices will be higher. There are more homes than buyers and prices will be lower.

There are more buyers than available homes and prices will be higher.

Why do investors/owners and office building property managers market their properties? They are required by law to do so. They want to attract prospective tenants and maintain their occupancy. They want to make a name for themselves in the area. They want to make other investors aware of an investment opportunity.

They want to attract prospective tenants and maintain their occupancy. (They want to attract prospective tenants and maintain their occupancy.)

The idea that money gains or loses value over time describes which concept? Inflation Interest Time is money Time value of money

Time value of money

Monica and Daniel Nicks have applied and been approved for a mortgage loan. Who will provide them the money for the loan? Andy Carmichael, the title company representative Mark Anderson, a mortgage broker Skip Lightly, the Nickses' real estate agent Tina Mathers, a mortgage banker

Tina Mathers, a mortgage banker

Why would a property manager need to know an owner's desired return on investment? To decide if the owner is worth working for To determine how much of an annual raise to request To determine how to generate the required net profit To recommend other investments to achieve that goal

To determine how to generate the required net profit (The property manager's primary goal is to obtain the highest net profit possible. Understanding the owner's investment goals will help achieve that.)

What is the trustee's role when a deed of trust is used to secure property for a loan? To collect payments and service the loan To hold funds in escrow To hold legal title to the property on behalf of the beneficiary until the loan is repaid To hold the note to the property on behalf of the trustor until the loan is repaid

To hold legal title to the property on behalf of the beneficiary until the loan is repaid (When a deed of trust is used in a title theory state, the trustee holds legal title to the property on behalf of the beneficiary.)

Why should the property manager include a personal note with each monthly report? To explain the figures to the owner To keep the reports from going beyond the scope of the contract To preserve the relationship with the owner To soften bad news and explain it further

To preserve the relationship with the owner (Including a note or letter with each monthly report demonstrates continued interest in the property. The note can communicate that operations are normal or explain deviations from the owner's expectations.)

Which formula is used to calculate an office building's productive space? Total square footage ÷ non-productive square footage = productive space Total square footage + non-productive square footage = productive space Total square footage ‒ non-productive square footage = productive space Total square footage x non-productive square footage = productive space

Total square footage ‒ non-productive square footage = productive space (Productive space is calculated by subtracting non-productive square footage from the building's total square footage.)

You have a client who's 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? Itemized lease Percentage lease Sublease Triple net lease

Triple net lease (A lease in which the tenant pays taxes, insurance, and maintenance (TIM) is a triple net lease.)

Victims of fair housing discrimination can seek redress in federal court. Within how many years of the alleged violation do they have to do so? Four years One year Three years Two years

Two years

According to the IRS, how much can active investors deduct from their active taxable income? Up to $25,000 Up to $30,000 Up to $40,000 Up to $50,000

Up to $25,000

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? Bankruptcy Repayment plan Short sale Voluntary conveyance of deed

Voluntary conveyance of deed (In lieu of foreclosure, some lenders will allow a borrower to voluntarily convey the property to the lender. This is also called a deed in lieu of foreclosure.)

When does a buyer'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 high and demand is low (A buyer's market occurs when supply is high and demand is low.)

When would ancillary probate proceedings be required? On the death of the second spouse. When an executor can't be found. When a will is being disputed. When the deceased owned property in another state.

When the deceased owned property in another state. (The appropriate disposition of a deceased person's assets requires probate proceedings. If the deceased owned property in another state, ancillary probate proceedings are required.

Supply and demand determine competition within a market. Which of the following is a true statement? When there are fewer houses on the market, buyers will pay less. When there are fewer houses on the market, demand wanes, as well. When there are fewer houses on the market, neighborhood blight occurs. When there are fewer houses on the market, sellers can demand more for their properties.

When there are fewer houses on the market, sellers can demand more for their properties.

Jolene, a bank employee, is asked to manage rental properties that the bank owns. At the very least, she should be given _______. A management contract Permission to sell the properties as advised Power of attorney Written authorization to sign leases

Written authorization to sign leases (Jolene needs a written authorization to sign leases. Instead of a formal contract between employer and employee, a written authorization to sign leases should be given to the employee.)

Discounted cash flow analysis is a form of what? Direct capitalization Present value Residual capitalization Yield capitalization

Yield capitalization

What's an income shelter? A deductible allowance from after-tax cash flow A deductible allowance from gross income A deductible allowance from net income A deductible allowance from petty cash flow

A deductible allowance from net income

What do you get when you add the purchase price to closing expenses and the cost of any improvements during the time of ownership, then subtract any depreciation taken? Adjusted basis Basis Capital gain ROI

Adjusted basis (This is the definition for adjusted basis.)

Which of the following options describes principal as it relates to loans? Amount of payment that will be applied to the loan balance Amount of payment that will be applied toward the interest Amount to be sent as payment each month Loan balance before the monthly payment is applied

Amount of payment that will be applied to the loan balance

How do you calculate maximum equity? Divide annual debt service cost by loan factor Divide annual NOI by debt coverage ratio Divide cash flow by desired rate of return Subtract annual debt service cost from annual NOI

Divide cash flow by desired rate of return (Divide cash flow by desired rate of return)

What market indicator is expressed as the number of months it takes to sell homes at the current rate of sales? Inventory rates Price levels Sales volume Vacancy rates

Inventory rates

Which type of legal structure may be either general or limited in type? Corporation Limited liability corporation Partnership Sole proprietorship

Partnership (Partnerships are a common legal structure and may consist of general and limited partners)

In order to entice tenants to sign a lease agreement with her, Margo is offering to decrease the tenant's first two months' rent. What type of concession is this? Illegal New signing Rental Temporary

Rental (Rental concessions can sometime mean a decrease in rent, or even free rent, for a certain amount of time.)

Mildred is the seller in an installment sale of a commercial property. If her installment obligations at the end of the tax year are _______, she has the option to pay the capital gains tax in full at sales time or through installment sale deferment. $2 million or less $3 million or less $4 million or less $5 million or less

$5 million or less

Grady plans to develop a community shopping center. What size lot will he need? 10- to 40-acre Eight- to 20-acre Seven- to 16-acre Six- to 14-acre

10- to 40-acre (Community shopping centers are built on sites that range from 10 to 40 acres.)

Hiram plans to do a 1031 tax-deferred exchange. He just sold his property. How many days does he have to close on a new property? 180 30 45 60

180 (Investors who want to use the 1031 tax-deferred exchange must identify the new property within 45 days of closing and must close within 180 days of the date of sale of the first property.)

Which of the following meets the definition of a triplex? A condominium on the third floor A dwelling with three separate living units A single-family home with three bedrooms A three-story building

A dwelling with three separate living units

Lizzie's on the hunt for an older, single-family house she can rehab and then put back on the market. If she has to rent the place for a while, so be it, but her ultimate goal is to sell the place for a profit. What type of investment opportunity is Lizzie considering? A conversion A fixer-upper A home targeted for rezoning An historic property

A fixer-upper (With a minimum outlay of cash, investors can easily increase the value of a fixer-upper by rehabbing it and then renting it out for a while, resulting in an immediate cash flow and a nice profit at resale.)

The direct capitalization method would be a good choice of appraisal method in which of the following situations? An apartment building in a very rural town where there are no other comparable investment properties. An apartment building that has consistent income and expenses year after year. A property in which the sale is contingent on its ability to produce a particular level of income for the next 10 years. A property which has experienced roller coaster-like ups and downs in income and expenses.

An apartment building that has consistent income and expenses year after year.

Which of the following must developers register with the Consumer Financial Protection Bureau? Any subdivisions that have 100 or more nonexempt lots Any subdivisions that have 20 or more nonexempt lots Any subdivisions that have 40 or more nonexempt lots Any subdivisions that have 80 or more nonexempt lots

Any subdivisions that have 100 or more nonexempt lots (To prevent fraudulent activity, developers have to register with the Consumer Financial Protection Bureau any subdivisions that have 100 or more nonexempt lots.)

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. Rental rates can include annual escalations based on market conditions. The landlord holds the right of reversion at lease end. Tenants may be required to move at the end of the lease. There can be many obligations and hidden costs in a lease, which can be onerous for tenants if they aren't aware of them.

Business owners can often make more money on their business than they can on the appreciation of the building where they conduct that business. (One reason for the popularity of commercial leasing is that business owners can often make more money on their business than they can on the appreciation of the building where they conduct that business.)

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

Buyer (Buyers are placing themselves in a position of potential risk, particularly if the underlying mortgage falls into default and foreclosure. To minimize this risk, most sellers will ask their lenders issue a recognition or release clause.)

Which type of corporation involves double taxation? C corporation Closely held LLC Subchapter S

C corporation (A C corporation is taxed at both the corporate level and the shareholder level.)

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? cause Company B's operating leverage is low, it can be more profitable in any kind of economy. Company B can make a marked impact on profit by increasing sales. Company B can reduce its variable costs by increasing sales. Company B doesn't have to increase sales as much as Company A to cover its fixed costs.

Company B doesn't have to increase sales as much as Company A to cover its fixed costs. (While a firm with high operating leverage can impact profits quickly by simply increasing sales, a downturn in sales has a negative impact. Since low operating leverage means that Company B has fewer fixed costs, it can cover fixed costs with fewer sales.)

What agency administers the Interstate Land Sales Full Disclosure Act? Consumer Financial Protection Bureau Department of Energy Conservation Developers Land Sales Administration Housing and Urban Development

Consumer Financial Protection Bureau (CFPB administers the act to protect consumers from the fraudulent sale of property sight unseen through the regulation of land sales across state lines.)

Which of the following Real Estate Investment Trusts focus on lending money for mortgages and investing in mortgage-backed securities? Equity REIT Investment REIT Mortgage REIT Security REIT

Equity REIT (In this type of partnership, non-general partners are limited in their authority.)

Which of the following statements is a true statement about points paid by a borrower for refinancing? If a portion of the amount refinanced is used to improve the home, points could be deductible Points paid to refinance a mortgage are fully deductible in the year paid Points paid to refinance a mortgage are never deductible in the year paid Points reduce the purchase price of the home

If a portion of the amount refinanced is used to improve the home, points could be deductible

Jackson purchased a group of unimproved single lots and improved each one before listing them for sale. What type of arrangement is this? Build to suit Improve and sell Lease Subdivision project

Improve and sell

Marshall is your investor client who is interested in purchasing an apartment building. You've identified several properties to show him. Since he's planning to remodel and add more units to the property he ultimately purchases, which of the following is something you should mention? Even though the properties are similar, the property taxes for those closest to the city will be higher. He will only be able to deduct the first $10,000 of property taxes on his investment property. Improvements increase assessed value and will increase property taxes. Property taxes aren't deductible for business purposes.

Improvements increase assessed value and will increase property taxes. (Property taxes = assessed value × tax rate. Improvements will increase the property's assessed value, so property taxes will also increase.)

Rhonda and Oliver bought an old schoolhouse with the hope of transforming it into a residence. They owned the property as joint tenants. After Oliver died, how did Rhonda own the building? As a joint tenant with rights of survivorship As a tenant in common with Oliver's heirs In severalty In trust

In severalty (When there are only two joint tenants, the death of one dissolves the joint tenancy. Rhonda is now the sole owner of an estate in severalty.)

Commercial banks fall into which of the following category of lenders? Institutional lenders Non-institutional lenders Peripheral lenders Subsidiary lenders

Institutional lenders

What's compound interest? Interest that's calculated based on the current principal of the loan amount multiplied by the interest rate Interest that's calculated based on the total amount of the original loan plus the amount calculated for each payment Interest that's reinvested by the lender Interest that's reinvested into an account that then earns interest

Interest that's reinvested into an account that then earns interest (Compound interest is when the interest on an account is reinvested into the account, allowing interest to be earned on the interest.)

What tax advantage does a limited liability company have? It combines pass-through taxation of partnerships with the limited liability of corporations. It reduces taxes when hiring minorities. Limited income potential means lower taxes. There are no tax advantages, only reduced liability.

It combines pass-through taxation of partnerships with the limited liability of corporations.

If David, a landowner, isn't ready to sell his land, ______ can provide himwith an income stream. Getting a part-time job Leasing to a long-term tenant Securing a second mortgage Tax deferrals

Leasing to a long-term tenant

What information is listed on the promissory note? Appraised value of property pledged as collateral Legal description of the collateral property Loan amount and schedule of repayment Title history of the collateral property

Loan amount and schedule of repayment (The note must include the terms of repayment, including the amount and schedule.)

Which of the following single-lot properties have a greater potential for being rezoned? Lots located in established neighborhoods Lots located near open space Lots located near railroad tracks Lots located near town lines

Lots located near town lines

What's interest? Amount of payment that will be applied toward the loan balance Amount to be sent for payment Loan balance after the payment is applied Money paid for the use of money

Money paid for the use of money (Interest is money paid for the use of money.)

An industrial development bond is a variety of ______ bond. Corporate Municipal Revenue Secured

Municipal (An industrial development bond is a variety of municipal bond. They give private investors an opportunity to take advantage of tax-exempt funds in exchange for helping to fund municipal projects, such as apartment buildings.)

Which clause found in a promotional land sale agreement states that the property will be released from the underlying lien after the buyer has paid a certain percentage of the balance on the individual lot purchased? Recognition Release Retracting Return

Release (A release clause states that the property will be released from the underlying lien after a certain percentage of the balance on the individual lot purchase has been paid.)

How do real estate investors generally make a profit? Capital gains taxes Only on rental income Only when the resell the property Rental income and resale value

Rental income and resale value (Because real estate offers two ways to earn a profit—rental income and the resale value—it's appealing to many investors.)

Kristoff got a bit behind on his mortgage and missed several payments. He and his lender devised a schedule that gives Kristoff an opportunity to make up those delinquent payments. What is this an example of? Bankruptcy Repayment plan Short sale Voluntary conveyance of deed

Repayment plan (If borrowers are able to arrange a repayment plan with their lender, it may be possible to avoid foreclosure by catching up on delinquent payments.)

Angus and his partner, Fergus, are so discouraged. All they want is a modest place to call home—not one of those McMansions that they see in every new subdivision. What current market trend is this an example of? Aging of Baby Boomers Greener buyers Increased density Smaller houses, bigger houses

Smaller houses, bigger houses (This is an example of the smaller houses, bigger houses trend. Some homebuyers are looking for homes with very small footprints, and others who can afford it are looking for expansive residences.)

Marlin wants to invest big. He's interested in a commercial property that's at least 1.2 million square feet, has tons of parking, and at least two big name anchor tenants. What type of retail space is Marlin considering? Factory outlet Neighborhood center Strip mall Super-regional mall

Super-regional mall

Property manager Cal has received three middle-of-the-night voice messages on his phone from the same tenant, Lin, who is furious with Cal's standard late rent fee. The late rent policy is spelled out in Lin's written lease. What should Cal do? Call Lin and offer him a one-time waiver of the fee in order to keep the peace and improve tenant relations. Leave a written note on Lin's door that asks him to review the rules that he agreed to when he signed his lease. Nothing. Cal has already established a clear written policy about late rent. Talk to Lin as soon as possible, listen to his complaint, and help him understand that the fine is non-negotiable.

Talk to Lin as soon as possible, listen to his complaint, and help him understand that the fine is non-negotiable.

In which form of co-ownership is a person's ownership inheritable? Joint tenancy Tenancy by the entirety Tenancy in common Tenancy in severalty

Tenancy in common (With tenancy in common, if one owner dies, that person's ownership is inheritable. It doesn't automatically pass to the other owners as it would with joint tenancy.)

Dom, the owner of a single-lot investment, has decided to lease his property. What happens if the tenant makes improvements to the property, and then decides not to renew the lease when it expires? Dom must pay the tenant for the improvements. The improvements belong to Dom. The tenant can remove any improvements as long as it doesn't damage the land. The tenant can subtract a portion of the cost of the improvements from the last month's rent.

The improvements belong to Dom. (Tenant improvements belong to the property owner.)

Who are the parties to a property management agreement? The property manager and property owner The property manager and the tenant The property manager, property owner, and tenant The property owner and the tenant

The property manager and property owner

This is the part of Eileen's job that she enjoys the least: Telling tenants they have to leave because they've failed to comply with the terms of their lease. Which commercial property manager duty is Eileen having to perform? Collecting rent Evicting tenants Leasing the property Overseeing maintenance

Evicting Tenants (A commercial property manager is responsible for evicting tenants who fail to comply with the terms and conditions of the lease agreement.)

Which of the following statements is true about the effect that e-commerce is having on commercial property investments? Factory outlets, big-box shopping centers, and shopping malls have all been hit hard. The demand for new retail construction has remained steady. There's no market for commercial property. Vacancy rates haven't increased.

Factory outlets, big-box shopping centers, and shopping malls have all been hit hard. (E-commerce has caused a noticeable slowdown in the demand for new retail construction, and the vacancy rates in existing spaces are around 13%. Factory outlets, big box shopping centers, and malls have been hit the hardest of all retail properties.)

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? Collecting rent Evicting tenants Leasing the property Overseeing maintenance

Leasing the property (One of a commercial property manager's primary duties is leasing the property and negotiating leases that are favorable to both tenant and owner.)

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. (The only element Sondra hasn't considered is whether the consent to enter into the contract was voluntarily given. Only real estate contracts have to be in writing, and parties are legally competent to enter into contracts from the age of 18.)