Chapter 17: Real Estate Investments, Business Brokerage, and Auctioning

Question 1

The most important factor of every investment is _______.

Answer 1

economic soundness

Question 2

A ______ allows groups of investors to invest in income-producing properties.

Answer 2

Real Estate Investment Trust (REIT)

Question 3

______ risk is not insurable, and is associated with changes in general market conditions.

Answer 3

Dynamic risk

Question 4

_____ risk can be offset with insurance, such as fire, flood, robbery, etc.

Answer 4

Static

Question 5

_____ leverage occurs if the investment returns more to the investor than the cost of borrowing the money.

Answer 5

Positive leverage

Question 6

_____ leverage occurs if the investment returns less to the investor than the cost of borrowing the money.

Answer 6

Negative leverage

Question 7

_____ expenses do not change with the level of occupancy. They are _____ and _____.

Answer 7

Fixed
taxes
insurance

Question 8

_____ expenses change with the level of occupancy.

Answer 8

Variable

Question 9

______ is money set aside for future use.

Answer 9

Reserve for replacements

Question 10

Mortgage payments, called ______, is not considered an operating expense.

Answer 10

debt service

Question 11

Operating Expenses
——————————————- =
Effective Gross Income

Answer 11

Operating expense ratio

Question 12

?????
————– = % Profit on investment
?????

Answer 12

Paid

Question 13

?????
————- = Loan-to-value ratio
?????

Answer 13

Property value

Question 14

When calculating the LTV, always use the _____ value amount.

Answer 14

lesser

Question 15

The ability to deduct a portion of the money invested in property each year due to depreciation is called _____ or _____.

Answer 15

cost recovery

tax depreciation

Question 16

Residential income-generating property owners can deduct a portion of their investment over _____ years on a straight-line basis.

Answer 16

27.5

Question 17

Commercial income-generating property owners can deduct a portion of their investment over _____ years on a straight-line basis.

Answer 17

39

Question 18

Tax depreciation allows the owner to write off the price of the property plus _____.

Answer 18

closing costs

Question 19

_____ is profit made when an income property is sold.

Answer 19

Capital gain

Question 20

Any capital gain realized from the sale of investment property may be transferred into another property with the taxing of the gain postponed. This is called _____.

Answer 20

tax-deferred exchange

Question 21

The _____ is the value of all of a company’s assets combined.

Answer 21

going concern value

Question 22

_____ assets have physical existence such as buildings and furniture.

Answer 22

Tangible

Question 23

_____ assets have no physical existence, but have monetary value, such as shares, trademarks, copyrights, patents, etc.

Answer 23

Intangible