Question 1

Choose the one most appropriate answer for each.
-the cash flow of a property divided by the amount of cash needed to purchase it

Accepted Answer

A) accelerated depreciation 
B) active investor 
C) appreciation 
D) at-risk rules 
E) blind pool
F)cash flow
G)cash-on-cash
H)downside risk
I)equity build-up
J)GLITAMAD
K)investment strategy
L)leverage
M)master limited partnership
N)negative cash flow
O)negative leverage
P)non-recourse financing
Q)passive investor
R)prospectus
S)straight-line depreciation
T)tax shelter 
A) accelerated depreciation 
B) active investor 
C) appreciation 
D) at-risk rules 
E) blind pool
F)cash flow
G)cash-on-cash
H)downside risk
I)equity build-up
J)GLITAMAD
K)investment strategy
L)leverage
M)master limited partnership
N)negative cash flow
O)negative leverage
P)non-recourse financing
Q)passive investor
R)prospectus
S)straight-line depreciation
T)tax shelter

Question 2

To be considered a good investment, when a property which generates a negative cash flow is sold,

Accepted Answer

A)  there must be a substantial increase in property value. 
B)  there need be little increase in property value. 
C)  the investor is best off if the property has decreased in value. 
D)  there must be a substantial down payment. 
A)  there must be a substantial increase in property value. 
B)  there need be little increase in property value. 
C)  the investor is best off if the property has decreased in value. 
D)  there must be a substantial down payment.

Question 3

Equity build-up can result from appreciation as well as debt reduction.

Accepted Answer

A) True 
 B)False

Question 4

Considering an apartment building, a retail business in a leased space, a housing subdivision selling finished homes or an unimproved tract of land, the apartment building is most likely to result in a negative cash flow.

Accepted Answer

A) True 
 B)False

Question 5

Choose the one most appropriate answer for each.
-results from mortgage reduction and price appreciation

Accepted Answer

A) accelerated depreciation 
B) active investor 
C) appreciation 
D) at-risk rules 
E) blind pool
F)cash flow
G)cash-on-cash
H)downside risk
I)equity build-up
J)GLITAMAD
K)investment strategy
L)leverage
M)master limited partnership
N)negative cash flow
O)negative leverage
P)non-recourse financing
Q)passive investor
R)prospectus
S)straight-line depreciation
T)tax shelter 
A) accelerated depreciation 
B) active investor 
C) appreciation 
D) at-risk rules 
E) blind pool
F)cash flow
G)cash-on-cash
H)downside risk
I)equity build-up
J)GLITAMAD
K)investment strategy
L)leverage
M)master limited partnership
N)negative cash flow
O)negative leverage
P)non-recourse financing
Q)passive investor
R)prospectus
S)straight-line depreciation
T)tax shelter

Question 6

The type of depreciation in which a fixed yearly sum is subtracted from the depreciable value of the property is called

Accepted Answer

A)  sum of the years digits. 
B)  straight-line. 
C)  double declining balance. 
D)  accelerated. 
A)  sum of the years digits. 
B)  straight-line. 
C)  double declining balance. 
D)  accelerated.

Question 7

The value of depreciation on an investment property is

Accepted Answer

A)  inversely proportional to the investor's tax bracket. 
B)  the same to all investors, regardless of their tax bracket. 
C)  directly proportional to the investor's tax bracket. 
D)  not a factor in the investment decision. 
A)  inversely proportional to the investor's tax bracket. 
B)  the same to all investors, regardless of their tax bracket. 
C)  directly proportional to the investor's tax bracket. 
D)  not a factor in the investment decision.

Question 8

Choose the one most appropriate answer for each.
-if the borrowed funds cost more than the benefits they are producing

Accepted Answer

A) accelerated depreciation 
B) active investor 
C) appreciation 
D) at-risk rules 
E) blind pool
F)cash flow
G)cash-on-cash
H)downside risk
I)equity build-up
J)GLITAMAD
K)investment strategy
L)leverage
M)master limited partnership
N)negative cash flow
O)negative leverage
P)non-recourse financing
Q)passive investor
R)prospectus
S)straight-line depreciation
T)tax shelter 
A) accelerated depreciation 
B) active investor 
C) appreciation 
D) at-risk rules 
E) blind pool
F)cash flow
G)cash-on-cash
H)downside risk
I)equity build-up
J)GLITAMAD
K)investment strategy
L)leverage
M)master limited partnership
N)negative cash flow
O)negative leverage
P)non-recourse financing
Q)passive investor
R)prospectus
S)straight-line depreciation
T)tax shelter

Question 9

In the various phases in the life cycle of improved real estate investments, ____________________ come between tenancy stage and the maturity stage.

Accepted Answer

The answer of In the various phases in the life...

Question 10

To insure that information on the soundness of an investment is passed on the prospective investors, several states have enacted ____________________ laws.

Accepted Answer

The answer of To insure that information on the soundness...

Question 11

As a rule of thumb, for the investor to break even, the value of raw land must double every 10 years.

Accepted Answer

A) True 
 B)False

Question 12

An owner-occupied residence cannot be depreciated for federal income tax purposes.

Accepted Answer

A) True 
 B)False

Question 13

Weldon bought a duplex and lives in one half. On his tax report, he can deduct

Accepted Answer

A)  all expenses on only the half he lives in. 
B)  all expenses on the rented half. 
C)  all expenses on both halves. 
D)  no expenses because it is his residence. 
A)  all expenses on only the half he lives in. 
B)  all expenses on the rented half. 
C)  all expenses on both halves. 
D)  no expenses because it is his residence.

Question 14

Roberto has been depreciating a piece of residential income property for 17 years.He then sells it to Pauline. How many more years can Pauline depreciate the property?

Accepted Answer

A)  10 1/2 years 
B)  17 years 
C)  Up to 27 1/2 years 
D)  It depends on cash flow and Pauline's tax rate 
A)  10 1/2 years 
B)  17 years 
C)  Up to 27 1/2 years 
D)  It depends on cash flow and Pauline's tax rate

Question 15

Which of the following is necessary in order to calculate cash flow?

Accepted Answer

A)  Monthly appreciation 
B)  Mortgage balance 
C)  Monthly rents 
D)  Economic rents 
A)  Monthly appreciation 
B)  Mortgage balance 
C)  Monthly rents 
D)  Economic rents

Question 16

Choose the one most appropriate answer for each.
-as defined by tax law, the amount an investor risks in an investment

Accepted Answer

A) accelerated depreciation 
B) active investor 
C) appreciation 
D) at-risk rules 
E) blind pool
F)cash flow
G)cash-on-cash
H)downside risk
I)equity build-up
J)GLITAMAD
K)investment strategy
L)leverage
M)master limited partnership
N)negative cash flow
O)negative leverage
P)non-recourse financing
Q)passive investor
R)prospectus
S)straight-line depreciation
T)tax shelter 
A) accelerated depreciation 
B) active investor 
C) appreciation 
D) at-risk rules 
E) blind pool
F)cash flow
G)cash-on-cash
H)downside risk
I)equity build-up
J)GLITAMAD
K)investment strategy
L)leverage
M)master limited partnership
N)negative cash flow
O)negative leverage
P)non-recourse financing
Q)passive investor
R)prospectus
S)straight-line depreciation
T)tax shelter

Question 17

When one holds unimproved land as an investment, expenses such as taxes and interest are

Accepted Answer

A)  not deductible for income tax purposes. 
B)  deductible in the year in which the expenses are incurred. 
C)  deductible the following year. 
D)  deductible only when the property is sold. 
A)  not deductible for income tax purposes. 
B)  deductible in the year in which the expenses are incurred. 
C)  deductible the following year. 
D)  deductible only when the property is sold.

Question 18

Choose the one most appropriate answer for each.
-number of dollars remaining each year after collecting rents and paying operating expenses and mortgage payments

Accepted Answer

A) accelerated depreciation 
B) active investor 
C) appreciation 
D) at-risk rules 
E) blind pool
F)cash flow
G)cash-on-cash
H)downside risk
I)equity build-up
J)GLITAMAD
K)investment strategy
L)leverage
M)master limited partnership
N)negative cash flow
O)negative leverage
P)non-recourse financing
Q)passive investor
R)prospectus
S)straight-line depreciation
T)tax shelter 
A) accelerated depreciation 
B) active investor 
C) appreciation 
D) at-risk rules 
E) blind pool
F)cash flow
G)cash-on-cash
H)downside risk
I)equity build-up
J)GLITAMAD
K)investment strategy
L)leverage
M)master limited partnership
N)negative cash flow
O)negative leverage
P)non-recourse financing
Q)passive investor
R)prospectus
S)straight-line depreciation
T)tax shelter

Question 19

An owner is using straight-line depreciation over a 27 1/2 year period on a $65,000 rental unit. If the improvements are worth $55,000, what is the depreciation in the first year?

Accepted Answer

A)  $2,000.00 
B)  $2,181.81 
C)  $2,363.63 
D)  $4,363.63 
A)  $2,000.00 
B)  $2,181.81 
C)  $2,363.63 
D)  $4,363.63

Question 20

In a general partnership

Accepted Answer

A)  each partner has limited financial liability. 
B)  each partner pays individual taxes on his or her share of the partnership's earnings. 
C)  the right of survivorship exists. 
D)  individual shares are not taxed. 
A)  each partner has limited financial liability. 
B)  each partner pays individual taxes on his or her share of the partnership's earnings. 
C)  the right of survivorship exists. 
D)  individual shares are not taxed.

Exam 26: Investing in Real Estate

Choose the one most appropriate answer for each. -the cash flow of a property divided by the amount of cash needed to purchase it

To be considered a good investment, when a property which generates a negative cash flow is sold,

Equity build-up can result from appreciation as well as debt reduction.

Considering an apartment building, a retail business in a leased space, a housing subdivision selling finished homes or an unimproved tract of land, the apartment building is most likely to result in a negative cash flow.

Choose the one most appropriate answer for each. -results from mortgage reduction and price appreciation

The type of depreciation in which a fixed yearly sum is subtracted from the depreciable value of the property is called

The value of depreciation on an investment property is

Choose the one most appropriate answer for each. -if the borrowed funds cost more than the benefits they are producing

In the various phases in the life cycle of improved real estate investments, ____________________ come between tenancy stage and the maturity stage.

To insure that information on the soundness of an investment is passed on the prospective investors, several states have enacted ____________________ laws.

As a rule of thumb, for the investor to break even, the value of raw land must double every 10 years.

An owner-occupied residence cannot be depreciated for federal income tax purposes.

Weldon bought a duplex and lives in one half. On his tax report, he can deduct

Roberto has been depreciating a piece of residential income property for 17 years.He then sells it to Pauline. How many more years can Pauline depreciate the property?

Which of the following is necessary in order to calculate cash flow?

Choose the one most appropriate answer for each. -as defined by tax law, the amount an investor risks in an investment

When one holds unimproved land as an investment, expenses such as taxes and interest are

Choose the one most appropriate answer for each. -number of dollars remaining each year after collecting rents and paying operating expenses and mortgage payments

An owner is using straight-line depreciation over a 27 1/2 year period on a $65,000 rental unit. If the improvements are worth $55,000, what is the depreciation in the first year?

In a general partnership

Nature and Description of Real Estate

Rights and Interests in Land

Forms of Ownership

Transferring Title

Recordation Abstracts and Title Insurance

Contract Law

Real Estate Sales Contracts

Mortgage and Note

Deed of Trust

Lending Practices

The Loan and the Consumer

Sources of Financing

Types of Financing

Taxes and Assessments

Title Closing and Escrow

Real Estate Leases

Real Estate Appraisal

Licensing Laws and Professional Affiliation

The Principal-Broker Relationship: Employment

The Principal-Broker Relationship: Agency

Fair Housing, Ada, Equal Credit, and Community Reinvestment

Condominiums, Cooperatives, Puds, and Timeshares

Property Insurance

Land-Use Control

Real Estate and the Economy

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