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54 Cards in this Set
- Front
- Back
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___________________________-- assets are those that have no physical existence |
intangible |
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When the rate of return on borrowed funds exceeds the rate of return on the investment, the investor is experiencing ______________ leverage |
negative |
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Liquidation value may be used to establish the minimum value of a business that is _____________ |
going out of business/failing |
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Dividing the operating expenses by the effective gross income results in the calculation of the ________________ratio |
calculation expense ratio |
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Fixed expenses typically include which of the following a) real estate taxes and hazard insurance b) management fees and depreciation c)utilities and repairs d)mortgage payments and income taxes |
a) real estate taxes and hazard insurance |
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Which of the following statements regarding reserves for replacements is correct? a) they are a cash expense b) they should not be considered in residential property income c) they are use to pay for normal maintenance of the property d)they are a noncash expense that is used to replace short-lived components that wear out from time to time |
d)they are a noncash expense that is used to replace short-lived components that wear out from time to time |
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What is the formula to determine the loan to value ratio? a) loan multiplied by value b) value divided by loan c) loan divided by value d) loan subtracted from value |
c) loan divided by value |
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What is the time period established by the IRS over which non residential investment real estate an be depreciated? a) 39 years b) 27.5 years c) 22 years d) 15 years |
a) 39 years |
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Why is the process of real estate investment analysis important to an investor? (a) It helps an investor select properties that meet personal objectives. (b) It determines the amount of taxes due on income-producing property. (c) It determines the exact cash flow from an investment property. (d) It makes possible the best use for a property based on zoning. |
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Fixed expenses typically include which of the following? (a) Real estate taxes and hazard insurance (b) Management fees and depreciation (c) Utilities and repairs (d) Mortgage payments and income taxes |
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Which of the following statements regarding reserves for replacements is correct? ( a) They are a cash expense. (b) They should not be considered in a residential income property. (c) They are used to pay for normal maintenance of the property. (d) They are a noncash expense used to replace short-lived components that wear out from time to time. |
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What is the formula to determine the loan-to-value ratio? (a) Loan multiplied by Value (b) Value divided by Loan (c) Loan divided by Value (d) Loan subtracted from Value |
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What type of risk is caused by changes in general business conditions? a) Dynamic (b) Operating (c) Capital (d) Static |
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If an investor earns a lower rate of return on capital invested than the rate paid on borrowed funds, what type of leverage is indicated? (a) Positive (b) Neutral (c) Negative (d) Cumbersome |
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What is the time period established by the IRS over which nonresidential investment real estate can be depreciated? (a) 39 years (b) 27.5 years (c) 22 years (d) 15 years |
(a) 39 years |
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All of the following items are relevant when estimating the value of a business, EXCEPT: (a) Personal property owned (b) Short-term liabilities (c) Business goodwill (d) Personal income taxes |
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Which document indicates the financial condition of a business as of a particular time? (a) Operating statement (b) Profit and loss statement (c) Balance sheet d) Bank statement |
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Which of the following statements best describes business brokerage? (a) It should not be conducted by real estate licensees. (b) It cannot be conducted by real estate licensees unless they also possess a mortgage broker's license. (c) It consists primarily of analyzing financial statements. (d) It would rarely involve securities transactions |
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Real estate licensees who are engaged in business brokerage might need to have a securities license if the transaction involves which of the following? (a) Negotiation of a new mortgage loan (b) An analysis of financial statements (c) Renegotiation of an existing lease (d) Transferring shares of stock or limited partnership interests |
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Under the Uniform Commercial Code, what is the document used to secure financing of personal property? (a) Deed (b) Bill of Sale (c) Security Agreement (d) Trust Agreement |
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All of the following are considered business assets, EXCEPT: (a) Goodwill (b) Notes payable (c) Accounts receivable (d) Furniture and equipment |
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Which document most closely resembles a deed? (a) Bill of Sale (b) Security Agreement (c) Balance sheet (d) Operating statement |
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John purchased his home for $328,000 with 95% financing. Calculate the down payment required. (a) $16,400 (b) $32,800 (c) $295,200 (d) $311,600 |
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You are reviewing the HUD 1 Uniform Closing Statement (for property not located in Dade County) and note that the documentary tax on the deed is $6,000. The tax on the promissory note is $2,500. What is the loan-to-value ratio of this transaction? (a) 42% (b) 43% (c) 82% (d) 83% |
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What is the operating expense ratio of a property that has an effective gross income of $90,000 and a net operating income of $40,000? (a) 44% (b) 56% (c) 67% (d) 83% |
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18-19-20 didnt copy from homework slides becuas eof pictures (math problems) |
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Generally speaking, what is the most important factor underlying good investment decisions? (a) The yield on the investment (b) The economic soundness of the investment (c) The amount of the tax shelter benefitting the investor (d) The ease of managing the investment |
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For which of the following would an appraiser likely appraise using the liquidation approach? (a) A business that is failing (b) An income producing business or property (c) A special purpose property (d) A single family home |
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Which concept applies to the value of businesses that are operational in a profitable capacity? (a) Highest and best use (b) Going concern (c) Liquidation (d) Tangible asset |
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What is the operating expense ratio of a property that has an effective gross income of $75,000 and a net operating income of $48,000? (a) 0.36 (b) 0.41 (c) 0.48 (d) 0.64 |
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The risk of loss due to fire and theft is normally considered which type of risk? (a) Static risk (b) Market risk (c) Dynamic risk (d) Business risk |
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A publishing firm was recently sold for $500,000. The firm owned several copyrighted works. The tangible assets of the business including computers, furniture, and fixtures totalled $150,000. What is the estimated value of the intangible assets? (a) $650,000 (b) $375,000 (c) $350,000 (d) $0 |
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A developer purchased three lots of 100 ft x 150 ft each for $23.00 per square foot. The lots were then subdivided into four parcels that were sold for $300,000.00 each. What percentage of profit did the developer make on this transaction? (a) 18% (b) 16% (c) 14% (d) 12% |
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A fitness club leases space at a major shopping center. The club has 10,500 square feet which represents 16% of the total leasable space at the shopping center. Calculate the total leasable space at the center? (a) 1,680 sq. ft. (b) 16,800 sq. ft. (c) 57,000 sq. ft. (d) 65,625 sq. ft. |
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How do current tax laws allow owners of investment properties to depreciate a portion of their investment? (a) Over 27.5 years for residential properties and 39 years for non-residential properties (b) Over 27.5 years for non-residential properties, and 39 years for residential properties. (c) Over 27.5 years for all investment properties. (d) Over 39 years for all investment properties. |
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Which of the following is not considered an operating expense for appraisal or income tax purposes? (a) Fixed expenses (b) Variable expenses (c) Reserve for replacements (d) Annual debt service |
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A residential duplex sells for $500,000. Closing costs total $32,500 and land represents 25% of the value. How much depreciation may be taken per year for tax purposes? (a) $15,456 (b) $14,522 (c) $12,600 (d) $10,240 |
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Tax law currently allows the owners of residential and low-income investment properties to depreciate a portion of their investment over how many years? |
27.5 years |
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Tax law currently allows the owners of NONresidential investment properties to depreciate a portion of their investment over how many years? |
39 years |
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What are the three types of income classification? |
APP Active income- from salaries and wages passice income- from rental activity and any investments in which the investor does not materially participate portfolio income- income from dividends |
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What is a capital gain/ loss? |
When an investment or business property is sold for an amount greater or lesser than the amount paid. |
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when the value of all assets is combined, it creates what is known as the ________________- |
going concern value |
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Risk that can be offset with insurance, such as fire, flood, robbery and so on is called___________ |
static risk |
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What is a REIT? |
real estate investment trust that allows groups of investors to invest in income-producing property |
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__________ is the total amount the seller recieves for the sale |
sale price |
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______________ is the original value of an asset for tax purposes |
basis, or cost basis |
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____________ is a measurement of how much is invested in a property for tax purposes, including IRS allowed improvements, referred to as capital improvements. |
Adjusted Basis (new addition to home, paving driveway, replacing roof, etc) |
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Are mortgage payments considering an operating expense? |
no they are called debt service and mortgage payments are not considered an operating expense. |
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Operating expense ratio = operating expenses/effective gross income |
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loan to value ratio= loan amount/property value |
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calculating profit on investment amount made/original amount paid = profit or loss % |
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What is considered active income? |
income from salaries or wages |
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what is considered passive income? |
income from rental activity and any investments in which the investor does not materially participate |
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what is considered portfolio income?
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income from dividends |
