Ch 27 Investing in Real Estate

Question 1

What are the 3 reasons for people to purchase Real Estate?

Answer 1

1. Owner Occupancy (to live in)
2. Investment (income)
3. Speculation (appreciation)

Question 2

What is the current federal exclusion for taxes on the sale of ones residence?

Answer 2

$250,000 of the gain for a single person.

$500,000 of the gain if filling jointly.

Question 3

What are the limitations of the tax deduction?

Answer 3

Limited to taxpayer’s principle residence plus one additional residence.

Question 4

Do taxes affect the price of real estate?

Answer 4

Yes

Question 5

What is the equity equation

Answer 5

equity = market value - liens and other charges

Question 6

Describe the real estate cycles

Answer 6

Phase 1: Recovery
Phase 2: Expansion
Phase 3: Hyper supply
Phase 4: Recession

Question 7

What are three different income sources?

Answer 7

Earned - Wages
Portfolio - Stocks, Bonds
Passive - Real Estate