Chapter 17: Real Estate Investments, Business Brokerage, and Auctioning Flashcards
The most important factor of every investment is _______.
economic soundness
A ______ allows groups of investors to invest in income-producing properties.
Real Estate Investment Trust (REIT)
______ risk is not insurable, and is associated with changes in general market conditions.
Dynamic risk
_____ risk can be offset with insurance, such as fire, flood, robbery, etc.
Static
_____ leverage occurs if the investment returns more to the investor than the cost of borrowing the money.
Positive leverage
_____ leverage occurs if the investment returns less to the investor than the cost of borrowing the money.
Negative leverage
_____ expenses do not change with the level of occupancy. They are _____ and _____.
Fixed
taxes
insurance
_____ expenses change with the level of occupancy.
Variable
______ is money set aside for future use.
Reserve for replacements
Mortgage payments, called ______, is not considered an operating expense.
debt service
Operating Expenses
——————————————- =
Effective Gross Income
Operating expense ratio
?????
————– = % Profit on investment
?????
Paid
?????
————- = Loan-to-value ratio
?????
Property value
When calculating the LTV, always use the _____ value amount.
lesser
The ability to deduct a portion of the money invested in property each year due to depreciation is called _____ or _____.
cost recovery
tax depreciation
Residential income-generating property owners can deduct a portion of their investment over _____ years on a straight-line basis.
27.5
Commercial income-generating property owners can deduct a portion of their investment over _____ years on a straight-line basis.
39
Tax depreciation allows the owner to write off the price of the property plus _____.
closing costs
_____ is profit made when an income property is sold.
Capital gain
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 _____.
tax-deferred exchange
The _____ is the value of all of a company’s assets combined.
going concern value
_____ assets have physical existence such as buildings and furniture.
Tangible
_____ assets have no physical existence, but have monetary value, such as shares, trademarks, copyrights, patents, etc.
Intangible
