Real Property Investment II

Question 1

Dividends

Answer 1

Returns from investments in a stock/REIT.

Question 2

Operating Statement includes what ____ & _____

Answer 2

Income and Expenses associated with operating property

Question 3

Who uses a “pro forma” statement?

Answer 3

generally used by prospective purchasers/investors as a means of forecasting the property’s performance or determining its value.

Question 4

T/F

A fixed expense is one that will vary depending on vacancy or occupancy levels

Answer 4

False

Question 5

Cash on Cash Return Formula

Answer 5

Cash Flow / Purchasing Costs = Cash on Cash Return

Question 6

Straight Line depreciation : Residential income - is how long?

Answer 6

27.5 years (useful life)

Question 7

Straight line depreciation: Non residential income – how many years?

Answer 7

39 years (useful life)

Question 8

Larry paid 240,000 for a duplex. According to the local tax assessor. the value of the land on which the duplex sits is $20,000. How much can Larry deduct this year from his income tax?

Answer 8

$220,000/27.5 = $8000

Question 9

Where can a property be exchanged for any other real property?

Answer 9

ONLY in the US.

Question 10

T/F

An investor who takes advantage of a 1031 Exchange has more buying power on the second purchase than another investor who simply sells one property to purchase another

Answer 10

True - they can use the funds that otherwise would have been paid in taxes for part of his purchase

Question 10

Operating Expense Ratio

Answer 10

Operating Expense / Effective Gross Income

Question 11

Loan to Value Ratio

Answer 11

Loan Amount / Property Value