Unit 2

Question 1

Betterments are an example of:

preservation of capital

improvement in amount of cash flow.

preservation and enhancement of capital.

improvement in timing and amount of cash flow.

Answer 1

preservation and enhancement of capital.

Response Feedback:
Correct! Betterments are an example of preservation and enhancement of capital.

Question 2

Which of the following is NOT an income-tax related advantage to real estate investing?:

Sheltering

Flexibility

Leverage

Reduced rates on some profits

Answer 2

Leverage

Response Feedback:
Correct! Which of the following is NOT an income-tax related advantage to real estate investing? Leverage

Question 3

During the Great Recession, one of the most significant disadvantages to real estate investors with maturing loans was:

high degree of personal management.

high interest rates.

exhaustion of tax benefits.

lack of liquidity.

Answer 3

lack of liquidity.

Response Feedback:
Correct! During the Great Recession, one of the most significant disadvantages to real estate investors with maturing loans was lack of liquidity.

Question 4

All of the following are risk factors EXCEPT:

Internal Revenue Code.

the Federal Reserve.

new building with no tenants and no track record.

necessity for constant management.

Answer 4

necessity for constant management.

Response Feedback:
Correct! All of the following are risk factors EXCEPT necessity for constant management.

Question 5

The concept of sustainability:

does not lend itself to tax breaks.

affects government contracts, including leases.

has largely been discredited because of the cyclical nature of real estate.

is relevant to social consciousness considerations but not economic evaluation.

Answer 5

affects government contracts, including leases.

Response Feedback:
Correct! The concept of sustainability affects government contracts, including leases.

Question 6

Key Term: Betterments

Answer 6

Improvements to property made by tenants

Question 7

Key Term: Liquidity

Answer 7

Condition under which something can be sold promptly at market value.

Question 8

Key Term: Mailbox Money

Answer 8

Passive revenue

Question 9

Key Term: Sheltering

Answer 9

Having income deemed as either nontaxable, as in the deduction of expenses, or as tax deferred, as in cost recovery (depreciation) deductions

Question 10

Key Term: Sweat Equity

Answer 10

The amount of equity created in a property by the work and improvements made by the direct labor or a person such as an owner.