Real Estate Investment CE: Test #4

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

B. Capital

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

C. Profitability

Other than a percentage lease, what type of lease is used with regional shopping centers? A. Full service B. Graduated C. Ground D. Net

D. Net

All trusts have three parties: the trustor, the beneficiary, and the ______. A. Attorney in fact B. Broker C. Founder D. Trustee

D. Trustee

What is the average gross leasable square feet for a super-regional shopping center? A. 1.2 million B. 775,000 C. 895,000 D. 990,000

A. 1.2 million

Alternatives to foreclosure include deed in lieu of foreclosure, short sale, or ______. A. Bankruptcy B. Eviction C. Mortgage lien D. Specific lien

A. Bankruptcy

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

A. Debt-to-Asset, 17%; Debt-to-Equity, 23%, Debt-to-Capital, 19% Debt-to-Asset = $75,000 ÷ $450,000 (17%); Debt-to-Equity = $75,000 ÷ $330,000 (23%), and Debt-to Capital, $75,000 ÷ ($75,000 + $330,000) (19%)

As supply increases, price ______. A. Decreases B. Exceeds demand C. Increases D. Stays the same

A. Decreases

One alternative to foreclosure is a voluntary conveyance of ______. A. Deed B. Keys C. Payment D. Will

A. Deed

Which of the following led to the 2007 financial crisis and negatively impacted investors that purchased properties in the early 2000s? A. Falling home prices B. Falling interest rates C. More home sales D. Rising home prices

A. Falling home prices

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? A. Foreign Investment in Real Estate Property Tax Act (FIRPTA) B. Foreign Investor Real Estate Investment Tax (FIRE-IT) C. Foreign Real Estate Tax Withholding Act (FRETWA) D.Tax Withholding for Foreign Holding Act (TWFHA)

A. Foreign Investment in Real Estate Property Tax Act (FIRPTA)

Which of the following is a risk most associated with wholesaling as a real estate investment strategy? A. Inability to immediately resell the property for a profit B. Running out of money before repairs are finished C. Tenant issues D. Vacancies

A. Inability to immediately resell the property for a profit

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

A. Interest that's calculated based on the current principal of the loan amount multiplied by the interest rate

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

A. Mortgage banker

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

B. Cash-on-cash return

Which class of office building can compete for premier office users and command above-average rents? A. Beyond class category B. Class A C. Class B D. Class C

B. Class A

After being required to put a minimum of 25% down on a loan, Duane invested in a multi-unit apartment building. What type of property does Duane own? A. Commercial B. Commercial residential C. MUD D. Residential

B. Commercial residential

For condominium properties, the owner's rights are detailed in which document? A. Condominium bill of rights B. Condominium bylaws C. Condominium declaration D. Condominium offering plan

B. Condominium bylaws

Vlad the appraiser is going to appraise an apartment building that has consistent income and expenses year after year. He's most likely to use which of the following methods? A. Annuity capitalization B. Direct capitalization C. Discounted cash flow analysis D. Yield capitalization

B. Direct capitalization

Deidra wants to invest in a super-regional shopping center. What size trade area can she plan to service? A. Five to 10 miles B. Five to 25 miles C. Five to 35 miles D. Five to 45 miles

B. Five to 25 miles

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

B. It's easier to secure a mortgage loan for a small commercial project.

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

B. Leveraging opportunities

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

B. Limited liability partnership

Which type of commercial property offers general merchandise and fashion, and is typically enclosed with inward-facing stores connected by a common walkway? A. Factory outlet B. Mall C. Neighborhood center D. Strip mall

B. Mall

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

B. They want to attract prospective tenants and maintain their occupancy.

Which type of deed is sometimes called a general warranty deed and contains all six covenants? A. Bargain and sale deed B. Full covenant and warranty deed C. Quitclaim deed D. Referee's deed

Bargain and sale deed B. Full covenant and warranty deed

Which of the following could be subject to a gift tax? A. $23,000 in medical expenses you pay for your neighbor B. A gift for $20,000 to a political organization C. A gift of $17,000 to your son D. A gift of a $50,000 car to a charity

C. A gift of $17,000 to your son

When it comes to investments, capitalization rate, risk, and value are closely tied together. Which of the following is a true statement? A. A higher capitalization rate results in a higher value. B. A lower capitalization rate indicates higher risk. C. A lower capitalization rate indicates lower risk. D. A lower capitalization rate results in a lower value.

C. A lower capitalization rate indicates lower risk.

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? A. Even though the properties are similar, the property taxes for those closest to the city will be higher. B. He will only be able to deduct the first $10,000 of property taxes on his investment property. C. Improvements increase assessed value and will increase property taxes. D. Property taxes aren't deductible for business purposes.

C. Improvements increase assessed value and will increase property taxes.

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? A. As a joint tenant with rights of survivorship B. As a tenant in common with Oliver's heirs C. In severalty D. In trust

C. In severalty

A land banker holds improved land in ___________. A. Escrow B. Exchange for mineral rights C. Inventory D. Probate

C. Inventory

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? A. Arbitration B. Deed in lieu of foreclosure C. Judicial foreclosure D. Non-judicial foreclosure

C. Judicial foreclosure

Which individual matches borrowers with the lender and loan option that best meets their needs? A. Credit analyst B. Mortgage banker C. Mortgage broker D. Underwriter

C. Mortgage broker

A taxpayer can claim a capital gains exclusion _______. A. Every year, provided a transfer of real property has occurred B. Once every five years C. Once every two years D. On every type of real estate sale

C. Once every two years

Charlie is monitoring market indicators in a particular area for her client, who wants to buy an oceanfront home. Which market indicator will tell her how much prices have fluctuated in the area over the past two years? A. Inventory rates B. New building permits C. Price levels D. Sales volume

C. Price levels

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? A. Buyer's market B. Imbalanced market C. Seller's market D. Stagnant market

C. 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? A. Bankruptcy B. Repayment plan C. Short sale D. Voluntary conveyance of deed

C. Short sale

Which of the following statements best describes the 200% rule as it relates to tax-deferred exchanges? A. The capital gains realized from the property sale can't be more than 200% of the original purchase price. B. The capital gains realized from the property sale can't be more than 200% of the sale price. C. The combined fair market value of the property (or properties) selected can't be more than 200% of the relinquished property. D. The fair market value of the relinquished property must be 200% more than the property (or properties) selected.

C. The combined fair market value of the property (or properties) selected can't be more than 200% of the relinquished property.

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

C. The performance of comparable properties

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

D. 6,000

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

D. 9%

What happens at the end of the term established for a grantor retained income trust? A. It passes through probate. B. It's automatically extended for period not to exceed 10 years. C. It's fully taxable. D. It vests to the beneficiary.

D. It vests to the beneficiary.

What's a residential property manager's greatest challenge? A. Deciding how much to charge for property management services and whether or not to live on-site as a resident manager B. Deciding whether or not to rent to same-sex couples, Hispanic applicants, single mothers with multiple children, or the physically disabled C. Determining if a lease is legally drafted and making sure that each tenant completes it correctly D. Keeping rental rates optimum while keeping expenses as low as possible to maximize profit for the owner

D. Keeping rental rates optimum while keeping expenses as low as possible to maximize profit for the owner

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

D. Money paid for the use of money

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 ______. A. Actual eviction B. Eviction C. Expiration D. Mutual agreement

D. Mutual agreement

The owner of a nail salon that is located in a strip mall pays base rent of $1,800 and 10% of gross sales. What kind of lease do they have? A. Graduated B. Gross C. Net D. Percentage

D. Percentage

What type of lease is used to secure a bonus from tenants who want a spot in the center of a neighborhood shopping center? A. Full service B. Graduated C. Net D. Percentage

D. Percentage

Marcia Weinstein dies, and her property is not held in a trust. Thus, her estate will go through ________ to ensure her property is distributed to her heirs in accordance with her will. A. A moderator B. An attorney C. Estate planning D. Probate

D. Probate

If a landlord removes the tenant's right of ______, the tenant can claim constructive eviction and vacate the property with no further financial responsibility to the landlord. A. Acceptance B. Control C. Ownership D. Quiet enjoyment

D. Quiet enjoyment

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

D. Record the deed in his name.

What type of deed are you likely to receive if you purchase a property with cash at a foreclosure auction? A. Bargain and sale deed B. Executor's deed C. Full covenant and warranty deed D. Referee's deed

D. Referee's deed

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? A. A list of all renters and their contact information B. A list of subcontractors who will be maintaining the property C. Details of all tenant concerns D. Rental receipts, income, disbursements, and operating expenses

D. Rental receipts, income, disbursements, and operating expenses

The building owner just congratulated Cyrus on attracting tenants to the office building that have similar business interests. At which office building property manager's duty has Cyrus excelled? A. Considering tenants' growth B. Determining capital expenditures C. Knowing the competition D. Shopping for tenants and getting the right tenant mix

D. Shopping for tenants and getting the right tenant mix

To protect themselves from liability, it's a good idea for property managers to ______. A. Avoid evictions at all cost B. Hold frequent community activities C. Speak with each tenant daily D. Stay up to date on local landlord-tenant laws

D. Stay up to date on local landlord-tenant laws

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? A. Call Lin and offer him a one-time waiver of the fee in order to keep the peace and improve tenant relations. B. Leave a written note on Lin's door that asks him to review the rules that he agreed to when he signed his lease. C. Nothing. Cal has already established a clear written policy about late rent. D. Talk to Lin as soon as possible, listen to his complaint, and help him understand that the fee is non-negotiable.

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

Which of the following trusts is created according to the terms of the will of a deceased person? A. Juvenile B. Living C. Tertiary D. Testamentary

D. Testamentary

In addition to the property address, the lease agreement start and end dates, and the monthly rent and deposit amounts, which of the following pieces of information should all commercial leases contain? A. A complete list of the other tenants and their rental rates B. A copy of the tenant's credit report C. A detailed description of the property D. The purpose for which the space is being rented

D. The purpose for which the space is being rented

An appraiser is using the direct capitalization method to calculate a value for an investment property. Which of the following is true? A. The subject property's income is expected to vary a lot over time. B. This method considers anticipated resale value. C. This method considers future income streams. D. This method converts a single year's expected income into a market value.

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

Which statement correctly identifies a federal fair housing law and what it addresses? A. The Civil Rights Act of 1866 made it illegal to discriminate on the basis of age and gender. B. The Fair Housing Act of 1968 attempted to eliminate discrimination based on gender. C. The Housing and Community Development Act of 1974 added marital status to the list of protected classes. D. Title VIII of the Civil Rights Act of 1968 prohibits housing discrimination based on race, color, national origin, and religion.

D. Title VIII of the Civil Rights Act of 1968 prohibits housing discrimination based on race, color, national origin, and religion.