Chapter 22 Investing in RE

Question 1

direct ownership

Answer 1

most prevalent form of RE investment, both individuals and corps may own RE directly and manage it as in investment income or cashflow.

Question 2

Appreciation

Answer 2

increases in value.

inflation and intrinsic value affect appreciation.

Question 3

inflation

Answer 3

the increase in the amount of money in circulation

Question 4

intrinsic value

Answer 4

is the result of a person’s individual choices and preferences for a given geographic area

Question 5

cash flow

Answer 5

the total amount of money remaining after all expenditures have been paid.

Question 6

due diligence

Answer 6

exploration of the benefits and drawbacks of the investment

Question 7

Leverage

Answer 7

is the use of borrowed money to finance an investment

Question 8

equity buildup

Answer 8

results from the addition to the amount paid as down payment on property of the principal portion of loan payments plus any increase in property value due to appreciations.

Question 9

pyramiding

Answer 9

the process of using one property to drive the acquisition of additional properties.

Question 10

depreciation

Answer 10

allows an investor to recover the cost of an income producing asset through tax deductions of the asset’s useful life.

Question 11

Cost Recovery Money

Answer 11

may only be taken on personal property and improvements to land

Question 12

Straight-line depreciation

Answer 12

taken periodically in equal amounts over an asset’s useful life.

Question 13

Accelerated cost recovery system

Answer 13

to claim greater deductions in the early years of ownership, gradually reducing the amount deducted in each year of useful life

Question 14

Capital Gain

Answer 14

the difference between the adjusted basis of property and it’s selling price

Question 15

Basis

Answer 15

determines the amount of gain to be taxed. the basis of the property is the investor’s initial cost of RE.

Question 16

Exchanges

Answer 16

used to defer cap gains tax by buying new property of like kind.

Question 17

boot

Answer 17

additional capital or property which will be taxed in an RE tansaction

Question 18

syndicate

Answer 18

is a business venture in which people pool their resources to own or deelop a particular piece of property.

Question 19

REIT RE investment trust

Answer 19

investors take advantage of the same tax benefits as do mutual fund investors

Question 20

REMIC

Answer 20

has qualification, transfer, and liquidation rules; it is notable because of the asset test requirement