Texas SAE Real Estate Investment

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

$3,000

Devon invested in subdivided land and then sold the lots after making improvements to them. This makes Devon ______.

A developer

Jenner purchased his first home, to which he'll have access forever, as far as he knows. Jenner owns ______.

A freehold estate

Hester has been doing her research and attending city planning meetings in hopes of finding a single-family home on the edge of a commercial district. What type of investment opportunity is Hester looking for?

A home targeted for rezoning

The element of a deed that signifies the grantor's intention to transfer title to the grantee is the ______.

Act of conveyance

Which of the following options describes principal as it relates to loans?

Amount of payment that will be applied to the loan balance

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

An investor who owns fewer than three single-family homes 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.

Lyn runs a brokerage and maintains a master file for all the office transactions. The file must be maintained for how long?

As long as Lyn's state requires All files must be maintained on state law requirements.

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

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

How are LLPs and LLCs taxed?

As partnerships (Both LLPs and LLCs enjoy the same type of taxation as partnerships.)

An LOA of 10% means that assessments are _________.

At 10% of value

Marcie bought a duplex, lived in one half, and rented out the other half. This is an example of what type of investing?

Buy and hold

Who is the withholding agent under Foreign Investment in Real Property Tax Act?

Buyer

What would an investor get after subtracting the adjusted basis from an investment property's sales price?

Capital gain or capital loss

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

Class C Class C office buildings command below-average rates for the area. They're functional, but not prestigious.

What do cooperative owners receive to demonstrate ownership?

Corporation shares and a proprietary lease

How do you calculate maximum equity?

Divide cash flow by desired rate of return (To calculate maximum equity divide cash flow by desired rate of return.)

Ricky Nubbins is three months behind in his rent and has received several reminders from the landlord that the rent is past due. As a result, the landlord has begun working through proper channels to legally end Ricky's lease before the contract end date. The landlord is terminating his lease through ______.

Eviction

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

Factory outlet

What is the difference between operating and financial leverage?

Financial leverage ratios compare a firm's debt to assets, equity, income, etc., while operating leverage is the relationship of fixed to variable costs.

Deidra wants to invest in a super-regional shopping center. What size trade area can she plan to service?

Five to 25 miles

Sara, a local tenant, just signed a lease with a property manager from a community shopping center. Assuming she has an average length lease, how long is the term?

Five years

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)

Which payment plan consists of the borrower paying a constant amount made up of principal and interest on a periodic basis (usually monthly)?

Fully amortized loan payment plan

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?

Gross lease

The three general groups of international buyers that real estate professionals may encounter are those who ______, those who are looking for a vacation home for when they travel to the U.S., and those who are looking for a luxury property as an investment.

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

Arnold plans to open a brokerage. What might make him select a sole proprietorship legal structure?

He wants control over branding.

What's compound interest?

Interest that's reinvested into an account that then earns interest

A land banker holds improved land in ___________.

Inventory

Which of the following organizations is temporary in nature?

Joint venture

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

Make certain the conversion will be allowed by the local government

What's the price at which a willing buyer and a willing seller would strike a deal given normal market conditions?

Market value (Both appraisers and real estate licensees use market value, although their approaches to determining market value may differ.)

Which individual matches borrowers with the lender and loan option that best meets their needs?

Mortgage Broker

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

Mutual agreement Leases may be terminated by expiration, eviction, or mutual agreement.

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

Net (A net lease is one in which the tenant pays some extra expenses—such as taxes, maintenance, or insurance—for the property.)

Ken understands the importance of interpreting market conditions. He has found that keeping track of how many new homes are being built in his area is a valuable indicator of demand. Which market indicator provides this information?

New building permits

Who might be impacted by the expiration of abatements?

New buyers

What issue could an investor face in an anti-development community?

Obtaining a building permit

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

One

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

Pipe or vent sticking out of the ground

The owner's covenants and an insurance provision are included in which of the following documents?

Property management agreement

If you and a sibling both inherited your father's property when he died, what type of deed would you need to get from your sibling in order to be the sole owner of the property?

Quitclaim deed

Which of these is a recommended strategy for staying up to date with trends in the real estate market?

Review reliable Internet sources for market updates.

Cooperative owners are actually called ______.

Shareholders

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

Stay up to date on local landlord-tenant laws

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

Supervises on-site personnel for multiple properties (There are two primary types of property managers—those who work on-site and those who work off-site, often working from a property management office that manages multiple properties. Residential lease terms are seldom negotiated.)

Which of the following must adhere to the rules of the Securities and Exchange Commission?

Syndicates

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

Tax

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

Taxes, insurance, and maintenance

Aimee is in the process of taking over property management for a large apartment complex owned by Ginger. What is one thing she should get from Ginger?

The contact information for Handy Manny, the maintenance man

The owner's covenants section of the property management agreement between manager Fred Baines and owner Lilian James contains three key pieces of information. First, Fred is named as the person responsible for managing the building. Secondly, Lillian is identified as the property's legal owner. What's the third key piece of information?

The fact that the owner is not facing foreclosure

Which of the following statements best describes the judicial foreclosure and sale process?

The lender must seek the court's permission to foreclose on the property used as collateral for the loan.

When two very similar properties are for sale in the same neighborhood, which one will sell first according to the principle of substitution?

The lower priced home

What is maximum equity?

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.)

In commercial lease agreements, tenants pay the owner in exchange for ______.

The right to operate their business on the property

Quentin is a victim of fair housing discrimination who is seeking redress in federal court. What is the limit on the amount of punitive damages he may be awarded?

There is no limit

Why are many middle-income cooperatives converted to condominiums?

To make resale easier

Which clause in a commercial lease determines how the tenant may use the space?

Use

When does a seller's market occur?

When supply is low and demand is high

What is a tax on your right to transfer property at your death called?

estate tax

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

niche marketing

Property taxes generate approximately ______ of local government revenue.

one third (1/3)

What type of lease is used most often with community shopping centers?

percentage

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

survey

______ is a legal action that liquidates or restructures debt. It can have a long-lasting negative impact on the borrower's ability to obtain financing.

Bankruptcy

Which of the following is a true statement regarding property taxes and investments?

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

Property manager Elise sends a monthly report to her client Katherine, who owns an apartment complex. What can Katherine expect to see on this report?

Rental receipts, income, disbursements, and operating expenses

In a lease agreement, what consideration does the landlord give to the tenant?

Right to occupy the property

Under a sole proprietorship form of business, ______.

The owner assumes personal liability for all debts

Which of the following statements about an office condo owner's responsibilities is true?

The owner is responsible for paying the PITI.

The capitalization process uses a capitalization rate, which is based on what?

The performance of comparable properties

Marcy wants to collect economic data about businesses and local growth and decline. Where can she go to find this data?

local chamber of commerce

Which of the following could be subject to a gift tax?

A gift of $17,000 to your son

There are three types of international buyers: those who have work visas and are looking for a home to purchase while they're in the U.S., those who are looking for a vacation home in the U.S., and those who are looking for ______.

A luxury home to purchase as an investment

Which of the following is a true statement about tax credits and tax deductions?

A tax credit is preferable. (A tax credit is a dollar-for-dollar deduction in taxes owed. A tax deduction merely reduces the taxable income on which taxes are based.)

Investor Bob owns a commercial property. He receives $100,000 in income from the property but is only taxed on $75,000. What might explain this?

Bob may have an income shelter.

When it comes to real estate investments, "commercial" is ______.

Both an investment strategy and a property type

Sam was putting up a basketball hoop by his driveway when one of the officers of the homeowners association walked by. "I'm so sorry," she said, "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

Which statement best describes an amortized loan?

Debt that is paid off by making periodic payments consisting of interest and principal With an amortized loan, the principal is paid down over the life of the loan according to an amortization schedule, typically through equal payments.

Tax credits for low-income housing are available to _______.

Developers and investors To provide incentive to build and develop low-income housing, developers and owners are often provided with tax credits.

When is an investor required to pay the alternative minimum tax?

If the tax calculated on IRS Form 6251 is higher than that calculated on the investor's regular tax return.

When considering a development in a particular area, the investor should consider nearby amenities—from restaurants and recreational facilities to churches and schools—as well as access to public transportation, parking, and utilities. As a group, these factors are all considered an area's __________.

Infrastructure (The access to sufficient infrastructure in an area (or lack thereof) that are well-suited to the development could make or break the success of project.)

You have an investor client who's interested in learning more about the advantages of a 1031 tax-deferred exchange. What might you tell him?

It allows investors to defer capital gains taxes when selling a property, provided they buy a like-kind property within a set amount of time.

Which type of property lends itself more to farming and agriculture?

Large, flat acreage properties in rural communities

Which of the following is an advantage of leasing for a single-lot investor?

Leasing gives the investor an income stream for the term of the lease. (Leasing provides the investor with an income stream for the term of the lease. The investor may also use a long-term lease as collateral to get financing for additional investments.)

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?

Leasing the property

If David, a landowner, isn't ready to sell his land, ______ can provide himwith an income stream.

Leasing to a long-term tenant

What is the name of the tenant group that, along with the property manager, is responsible for regional shopping center promotional activities?

Merchants' association

"Separate property" is property most likely acquired ______.

Prior to marriage

What does a mortgage real estate investment trust invest in?

Real estate debt

Cheng is selling his property to Jericho. What's the best method Jericho can use to ensure his interest in the property?

Record the deed in his name.

Samuel is selling a 99-lot subdivision across state lines. His rival, Max, has a 123-lot subdivision that he's selling across state lines. What must Max do that Samuel doesn't have to do?

Register the project with the Consumer Financial Protection Bureau.

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?

Repayment plan

Liz is assisting a client who's looking for a commercial space to lease. Which of the following duties will Liz be expected to perform on her client's behalf?

Represent her client's interest in all negotiations and transactions regarding the lease of the property.

If a minor enters into a contract with an adult, which of the following is true?

The minor may legally hold the adult to the contract, but the adult cannot legally hold the minor to the contract.

Why may a developer have to pay impact fees?

To address the burden on existing infrastructure caused by the development. (A developer may have to pay impact fees to help pay for the increased cost of at least part of the increased municipal services caused by the development.)

When a landlord allows the tenant to use the premises of a given unit, the landlord is satisfying which element of a valid lease contract?

consideration

Your tenant, Tom, has called to complain about a broken water heater. You hire someone to replace it. What type of maintenance are you performing?

corrective

What is the formal action to impose the property tax?

levy

Which of the following is a passive type of real estate investment?

limited partnership