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Real Estate > Unit 1 > Flashcards

Unit 1 Flashcards

1
Q

What is the business of bringing people together in a real estate transaction?

A

A Brokerage

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2
Q

What is a broker/brokerage/firm?

A

A person or company
licensed to perform brokerage services for a fee
may employ real estate licensees

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3
Q

What is a A Salesperson/broker-associate/provisonal broker?

A

a person employed by or associated with a broker
performs brokerage services for the broker
may not provide brokerage services independently

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4
Q

What is the process of developing an opinion of a properys market value, based on established methods and judgement called?
Who performs this?

A

Appraisal

Appraiser

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5
Q

A property manager is a person or company hired to maintain and manage property on behalf of the property own is what?

A

Property management

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6
Q

The business of providing funds for real estate sales transactions

A

Financing

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7
Q

What are subdivisions and Developments?

A

Subdivision: dividing a single property into smaller parcels
Development: site preparation, construction of structures and other improvements

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8
Q

What are home inspections?

A

combines a practitioners interest in real estate with skins and training in the construction trades

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9
Q

What are the six catagories of real estate?

A

residential: where people live
Commercial: retail office
Mixed use: commercial and residential uses in same building
Industrial: manufactures, plants, warehouses
Agricultural: farms
Special purpose: church, schools

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10
Q

Deductions allowed on a first and second residence?

A

Points paid on loans used to improve or acquire
must itemize
mortgage interest
property taxes

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11
Q

What does POIT stand for?

A

Points, origination fees, interest, and property taxes

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12
Q

Capital Gains, Short term, and long term

A

Short term gain: property held 12 months or less taxed base on ordinary income
long term gain: property held more than 12 months is taxed differently

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13
Q

Taxation of gain on sale or principal residence

A

250,000 max if single tax payer
500,000 maximum if married or filing jointly
must own and occupy for at least two of 5 years preceding the sale.

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14
Q

What is depreciation also considered?

A

Cost Recovery

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15
Q

Depreciation

A

Real Estate investors and business property owners are allowed to take an annual depreciation deduction on real estate improvements
the residential rent property allowance is taken over 27.5 years
the commercial property allowance is taken over 39 years

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16
Q

How is the amount of Depreciation determined?

A

Straight line method

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17
Q

1032 tax-deffered exchanges (like-kind exchanges)

A

are used by investors and business property owners to DEFER PYMT of capital gains taxes on the sale of business or investment properties.
The taxes will eventually have to be paid for

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18
Q

What are 4 benefits to real estate investment?

A

Cash flow,
tax benefits,
potential appreciation
principal reduction

19
Q

How real estate maxes money?

A

Cash flow: income(cashflow)-expenses(tax benefits)=increased cash flow
net worth: assets (appreciation) - liabilities (principal reduction)= increased net worth

20
Q

What are advantages to real estate investment?

A

Real estate investment typically produces an above average return over time
appreciation: the value of the property generally increases
equity buildup: principal and interest payments slowly pay down any debt used to purchase the property
leverage: investors can use borrowed money to finance an investment
tax benefits: depreciation deduction and 1031 exchange

21
Q

Disadvantages to Real estate investment?

A

Liquidity: refers to how quickly an asset may be converted into cash
real estate lacks liquidity compared to investments such as stocks and mutual funds

Investment property requires property management

Risk: rents may decrease due to competition or economics, values may decrease

22
Q

What is the business of bringing people together in a real estate transaction known as?

A

Real Estate brokerage

23
Q

What is the process of developing an opinion of a property’s value (typically, market value) based on established methods and professional judgement?

A

appraisal

24
Q

Selling real estate can take a long time when compared to other types of investments. This disadvantage of owning real estate is called

A

lack of liquidity

25
Q

A disadvantage to owning real estate is

A

The lack of liquidity

26
Q

Fan sold her house that she owned in severalty and had a capital gain of $175,000 to exclude that gain from her income for tax purposes she must

A

Have lived in the house for or the last 5 years

27
Q

What can be deducted from income taxes?

A

origination fees, points, interest and taxes POIT

28
Q

To deduct items on personal income tax the tax payer

A

must use an itemized form

29
Q

An investor who does not want to pay capital gains tax on the sale of an investment property should consider

A

using a 1021 tax deferred exchange

30
Q

Who do clients hire for representation in real estate transactions

A

brokerage firms

31
Q

The terms real estate agent, licensee, and real estate professional generally refer to

A

Real estate brokerage firms
licensed brokers
real estate salesperson

32
Q

True of false? REal estate professionals must be licensed in each state where they practice.

A

true

33
Q

Real estate brokerage activities include charge a fee for helping others

A

buy a property
sell property and
manage property

34
Q

A real estate broker/brokerage/firm

A

is a person or a company
is licensed to charge clients a fee for brokerage services
may employ real estate licensees.

35
Q

To act as an appraiser a real estate professional must obtain a license issued by which entity

A

the state

36
Q

What best describes an appraisal

A

an opinion

37
Q

A real estate brokerage hired to maintain and manage property on behalf of the property owner is

A

a property manager

38
Q

Which licensee works with borrowers seeking a mortgage loan to buy a home?

A

mortgage loan originator (MLO)

39
Q

Commercial real estate includes all of the following land uses

A

office buildings, retail facilities, parking structures

40
Q

Commercial and residential uses in the same building or development is known as which type of real estate?

A

mixed use

41
Q

Commercial property has improvements that cost $390,000 the depreciation allowance is 39 years. What is the annual depreciation deduction?

A

$10,000

42
Q

Commercial property has improvements that cost $390,000. The depreciation allowance is 39 years how much depreciation would the owner be allowed to claim over an eight-year period?

A

$80,000

43
Q

Tax advantages for real estate investors such as depreciation and 1031 exchanges hel

A

offset real estates lack of liquidity

Real Estate (22 decks)

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