Unit 1: Intro to Real Estate Business Flashcards
Broker
A person or company licensed to buy, sell, exchange, or lease real property for others and to charge a fee for these services.
Salesperson (Sales Assoc. Assoc. Licensee)
employed by or associated with the broker to perform brokerage activities on behalf of or for the broker
Real Estate Licensee
A person who has satisfied the requirements of a licensing agency, as authorized by state legislation
The basic responsibility of the property manager is to protect the owner’s investment and maximize the return on that investment.
True
Most sales are financed by a loan that is secured by a mortgage or deed of trust on the property purchased.
True
Subdivision
The dividing of a single property into smaller parcels
Development
Preparation of site and construction of structures or other improvements
Off-site improvements in development
water lines and storm sewers
On-site improvements in development
New homes or recreational amenities
Residential
all property used for single-family or multifamily housing, whether in urban, suburban, or rural areas
Commercial
business property, including office space, shopping centers, stores, theaters, hotels, and parking facilities
Mixed-use
Property that allows for two or more commercial and residential uses in the same building
Industrial
Warehouses, factories, land in industrial districts, and power plants
Agricultural
Farms, timberland, ranches, and orchards
Special Purpose
Privately-owned properties, such as places of worship, schools, and cemeteries, as well as publicly held properties, such as schools, municipal service buildings, and parks
Apartment Building was the response….
to housing demand in crowded urban areas
Apartment complex
a group of apartment buildings with a varying number of units in each building
Condominium
popular form of residential ownership, offering the security of owning property without the care and maintenance responsibilities
A condominium owner owns an individual unit and also…
shares ownership with other unit owners of common facilities such as halls, elevators, reception area, laundry room, exercise room, main entrance security system, and surrounding grounds, which may include a swimming pool, clubhouse, tennis court, or other amenities
A Cooperative
Units that are not owned but instead, each owner shares in a corporation that holds title to the real estate
Planned unit developments (PUDs/Master Planned Communities)
consist entirely of residences, but can also serve to merge such diverse land uses as housing, recreation, and commercial units into one self-contained development.
Highrise developments (Mixed-use)
combine office space, stores, theaters, and apartment units into a single vertical community. MUDs are self-contained and may offer restaurants, grocery stores, beauty parlors, barbershops, etc.
Converted-use properties
factories, warehouses, office buildings, hotels, schools, churches, and other structures that have been converted to residential use
Factory-built housing
permanent installations built to federal specifications, providing principal residences or vacation homes
Modular home
components are assembled at a building site on a prepared foundation
Fair Housing
The decision to purchase or lease housing, where to do it, should be based on an individual’s prefenences and finances. Federal Law PROHIBITS discrimination in the provision of housing and housing-related services (inluding lending) based on an individual’s race, color, national origin, religion, sex, familial status, or disability
Market
where goods can be bought or sold
Supply in real estate
residential and commercial land and structures
Demand in real estate
the number of homebuyers and businesses seeking to buy property can vary greatly depending on general economic conditions
Greater supply means producers need to attract more buyers, so they can lower prices
Greater Demand means producers can raise their prices because buyers compete for the product
True
Twho characteristics that govern supply and demand in real estate:
Uniqueness and Immobility
Uniqueness
no matter how identical they may appear, no two parcels of real etstae are exactly alike; each occupies its own unique geographic location
Immobility
the property cannot be relocated to satisfy demand where supply is low, nor can buyers always relocate to areas with greater supply.
Real estate markets are local.
True
What are factors that affect RE supply and demand?
Labor force availability, construction and material costs, and governmental controls and financial policies
Shortages of skilled labor, building materials, or an increase in cost of materials and transfer costs (taxes and fees) can discourage development construction
True
The disocunt rate has a direct impact on the interest rates the banks charge to borrowers, which in turn plays significant part ini people’s ability to buy homes
True
What two other organizations can affect the amount of money available to lenders for mortgage loans?
The Federal Housing Administration (FHA) and Government National Mortgage Association (Ginnie Mae)
While high taxes may deter investors, tax incentives may attract new businesses and industries and bring increased employment and expanded residential real estate markets
True
Factors that can affect demand in Real Estate
population, demographics, and employment and wage levels
The demand of housing grows with the population
True
If growth in locations cease it may be due to
economic changes, social concerns, or population changes
Demographics
the study and description of a population
Niche Marketing
targeted marketing of specific demographic population
How people use their income depends on consumer confidence, which is based not only on perceived job security but also on the avilable of credit and the impact of inflation
True
Homeowner’s Equity
The difference between the market value of the property and the amount still owed on it
Financial considerations for homeowners
- Property value increases
- mortgage debt reduced through monthly payments and the ownership interest increases
- Tax deductions available to homeowners for interest and property tax
- Profit made on the sale of a principal residence is not taxed
For mortgages taken out after Dec. 14th 2018, an individual may deduct interest off of debt up to $750,000
True
Between Jan. 1st, 2018, and Dec. 31st, 2025, the interest on a second mortgage is no longer tax deductible
True
Exclusions
items that are never subject to tax bc they are outside the intended scope and authority of Missouri’s sales and use tax laws
A taxpayer who files singly is entitled to a $250,00 exclusion
True
The exclusion may be used repeatedly, as long as the homeowner has both owned and occupied the property as the primary residence for at least….
2 of the 5 years.
Over time-say 10 - 20+ years or more- a real estate investment typically shows an…..
above-avg Rate of Return
Adv of REI
- Rate of Return
- Control
- Appreciation
- Equity Buildup
- Leverage
- Tax Benefits
As the owner pays down the amount owed by reg payments, however, and if the payments include payment of part of the principal owed on the loan, that principal increases the owner’s equity
Equity Buildup
the use of borrowed money to finance an investment
Leverage
As a rule, an investor can receive a max return from an initial investment by making a small down payment, paying a low interest rate, and spreading mortgage payments over a long period of time
True
When a property value drops, for wahtever reason, the highly leveraged investor may be unable to pay financing
True
Federal Tax Benefits
Depreciation: recover the cost of an income-producing asset through tax deductions over the asset’s useful life
Capital gain: difference between the purchase price of the property and its net selling price
What is one way to avoid a federal taxation on a capital gain?
exchange the investment property for one of the same value.
Disadvantages of REI
- Liquidity
- Active management
- Risk
Liquidity
how quickly an asset may be converted into cash
