Deck 15: Real Estate Investments

Question 1

You would use the ROI formula to provide returns on capital gains or ________.

A)appreciation on the property you own
B)for passive income
C)for the taxes you are going to pay
D)None of the options are correct.

Answer 1

appreciation on the property you own

Question 2

Which of the following items would be considered real estate property?

A)Boat
B)Motor coach
C)House
D)All options are correct.

Answer 2

House

Question 3

Which is not an advantage of owning rental properties?

A)Tax advantage
B)Passive income
C)Depreciation risks
D)Asset appreciation

Answer 3

Depreciation risks

Question 4

What does ROI stand for?

A)Return on index
B)Rich on investment
C)Return on investment
D)Rental of investment

Question 5

A type of real estate investment in which a person or company buys property for a low price with the intention of improving it and reselling it quickly is called

A)a REIT.
B)rental property.
C)flipping property.
D)turnover property.

Question 6

Which of the following is based on income received in the form of rent payments less maintenance and operating expenses?

A)RIA
B)REA
C)ROA
D)ROI

Question 7

Buying a dilapidated house that is unclean for living standards and restoring it to the house it was 50 years ago in order to sell it again is an example of

A)leasing.
B)flipping.
C)updates and modifications.
D)real estate property.

Question 8

A ________ is the ratio of money gained or lost on an investment relative to the amount of money invested.

A)return on investment
B)profit
C)investment yield
D)turnover

Question 9

REITs are investments in ________.

A)real estate
B)stock
C)bonds
D)All options are correct.

Question 10

Buying a(n)________ is a simple and good way to get into real estate investing.

A)house
B)foreclosed property
C)apartment complex
D)lot for development

Question 11

A(n)________ collects funds from a group of individuals and invests it in real estate.

A)"flipping" crew
B)REIT
C)ROI
D)None of options are correct.

Question 12

What options do you have in real estate investment if you do not have the time or skill to be a landlord?

A)Stay out of the business
B)Flip real estate
C)Quit your job so you have the time; the tax advantage will be worth it
D)Invest in a real estate investment trust (REIT)

Question 13

By law,what percentage of their taxable income must REITS pay out to their shareholders in the form of dividends?

A)50%
B)60%
C)75%
D)90%

Question 14

What is the ROI per year (exclusive of property taxes and insurance)on an empty lot purchased for $10,500,held for five years,and then sold for $25,000?

A)18.95%
B)20.85%
C)38.85%
D)58.85%

Question 15

What is meant by "flipping" properties?

A)To pool funds from a group of individuals and invest in real estate
B)To buy,upgrade,and sell property over a short time period for a profit
C)To switch properties with someone randomly
D)To have the bank take ownership of a property

Question 16

What do you call someone who invests in real estate for the purpose of reselling it for a profit?

A)Real estate agent
B)Realtor
C)Flipper
D)Homeowner

Question 17

Which of the following is a type of real estate investment option?

A)Rental property
B)REITs (real estate investment trusts)Rental property
C)"Flipping" properties
D)All options are correct.

Question 18

What is not a disadvantage of owning rental property?

A)Depreciation
B)Legal fees
C)Insurance costs
D)Vacancies

Question 19

If you have a house occupied by a renter,what do you not need to set aside money for?

A)Maintenance repairs
B)Property taxes
C)Back-up money in the event the renter fails to pay
D)Renter's insurance

Question 20

What is a rental property?

A)Housing,farm,or commercial property that is rented or leased to others.
B)The stated payment for the temporary possession of a house,land,or other property,made usually at fixed intervals by the tenant to the owner.
C)A contract by which the landlord gives to the tenant the use and possession of lands,buildings,or property to improve and sell for a profit.
D)The process of buying,upgrading,and selling property over a short time period for a profit.

Question 21

________ is a legal document that offers securities or mutual fund shares for sale,explains the offer,includes the terms,issuer,and planned use of money,and provides historical financial statements.

A)Leverage
B)Prospectus
C)Equity
D)Mortgage

Question 22

What is an S Corporation?

A)A company that has limited personal liability and allows you to pass the income for tax purposes or be taxed as a corporation.
B)A regular corporation that has 75 or less employees,is taxed like a partnership,and passes net income or losses on the shareholders.
C)A voluntary contract among two or more persons to place their capital,labor,and skills in a business corporation with the understanding that there will be a sharing of the profits and losses among the partners.
D)A corporation located in a state that begins with the letter 'S.'.

Question 23

How is your income taxed in a rental partnership?

A)Individual tax
B)Corporation tax
C)Joint tax
D)Not taxed

Question 24

Because real estate investment trusts (REITs)are required to pay out ________,they are a relatively liquid investment.

A)10%
B)25%
C)75%
D)90%

Question 25

Responsibilities of a landlord are covered under the ________.

A)Fair Housing Act
B)Fair Tenant Act
C)Fair Landlord Act
D)None of the options are correct.

Question 26

The key in flipping is to buy property at least ________ below market value.

A)5%
B)10%
C)15%
D)20%

Question 27

If selling rental property and buying a like property,the IRS allows you to reinvest ________ of the equity from the sale of the property to a like property within 45 days of the sale,thus deferring the gain.

A)none
B)50%
C)75%
D)100%

Question 28

As a rule of thumb,REITs should make up what percent of your portfolio?

A)1-5%
B)5-10%
C)10-15%
D)15-20%

Question 29

Equity and mortgage are two types of ________.

A)REITs
B)investments
C)brokers
D)real estates

Question 30

What is a major disadvantage of owning rental property?

A)You cannot set your own rules for the house.
B)You cannot evict a tenant.
C)Risk of the tenant not making all of his or her rent payments.
D)All of the options are correct.

Question 31

Typically,what area of a city is the best location in which to buy a property to flip?

A)Downtown
B)Down the street from a school being built
C)Rural area right outside of town
D)Right next to the local mall

Question 32

Which of the following is not true when it comes to asset appreciation?

A)It is taxed at your capital gains rate if property is held for more than one year.
B)If you sell property and buy a like property,the IRS allows you to reinvest 100% of the equity.
C)Capital appreciation is the difference between the selling price and the purchase price.
D)It is a great way to build your real estate portfolio without paying taxes on gains until liquidation.

Question 33

Which of the following is not included in a security prospectus?

A)Terms
B)Issuer
C)Objective
D)Historical financial statements

Question 34

What is the difference between equity REITs and mortgage REITs?

A)Equity REITs invest in mortgage loans,and mortgage REITs invest money directly in property.
B)Equity REITs invest money directly in property,and mortgage REITs invest in mortgage loans that finance the development of properties.
C)Equity REITs are riskier and are usually scams while mortgage REITs are never of any risk.
D)None of the options are correct.

Question 35

Which of the following activities can a landlord not do?

A)Ask for a reference
B)Talk to a tenant's previous landlord
C)Run a credit check
D)Be selective about which candidates he or she screens

Question 36

What type of REIT invests money directly into property?

A)Equity REIT
B)Mortgage REIT
C)Loan REIT
D)Refinance REIT

Question 37

Equity REITs invest in ________.

A)Loans to finance property development
B)Property
C)Real estate stocks
D)Municipal bonds

Question 38

What are the two types of REITs?

A)Business and personal property
B)Equity and mortgage
C)Equity and home
D)Agriculture and personal property

Question 39

Which of the following invests money directly in property?

A)Mortgage REITs
B)Asset REITs
C)Equity REITs
D)Property REITs

Question 40

When selling rental property,the difference between the selling price and the purchase price is ________ if you have held the property for more than two years.

A)capital appreciation and is taxed at a capital gains tax rate
B)passive income and is an easy way to make money with little or no effort
C)passive income,and thus,is not taxed
D)personal property appreciation and is taxed as personal income

Question 41

A real estate investment trust pools funds from a group of individuals and invests it in real estate.

Question 42

Leverage is ________.

A)the amount of debt carried relative to investment
B)an arrangement between brokers who are real estate board members
C)the selling of borrowed stocks
D)the balance of debt across active projects

Question 43

The difference between an equity REIT and a mortgage REIT is that an equity REIT invests in mortgage loans that finance the development of properties.

Question 44

In looking for houses to flip,you will want to look for areas that generally have strong employment and a growing population.

Question 45

What is the best kind of house to buy if you plan to flip it?

A)A one-bedroom home
B)A mansion
C)A farm house
D)All of the options are correct.

Question 46

________ puts less of your own money at risk as well as earns a higher return on your original investment.

A)No leverage
B)Low leverage
C)High leverage
D)Equity leverage

Question 47

Many items purchased for a home office or for rental property you own can be used as tax advantages.

Question 48

A partnership provides the partners holding the property unlimited liability protection.

Question 49

Which of the following is not a step to successful flipping?

A)Finding property to buy
B)Buying equipment to fix up the property
C)Adding value to the property
D)Reselling property

Question 50

Using leverage,what is the ROI on a $100,000 investment purchased with a bank loan and a $20,000 down payment if you have used sweat equity to improve its value by $10,000?

A)1%
B)10%
C)50%
D)100%

Question 51

The return on investment for flipping houses is driven by ________.

A)price
B)value
C)leverage
D)timing

Question 52

What percent of your money do you have at risk when you are flipping a house?

A)80%
B)100%
C)110%
D)It depends on the amount of leverage you have in your investment.

Question 53

Most real estate agents charge ________ as a commission to sell your property.

A)1-2%
B)3-5%
C)6-7%
D)8%

Question 54

________ is an arrangement among real estate board members in which all of the brokers share information regarding their listings with one another and may negotiate the transaction.

A)Multiple Listing Service (MLS)
B)Leverage
C)Prospectus
D)Rental property

Question 55

Return on investment (ROI)is driven by ________.

A)leverage
B)the loan interest rate
C)how long it takes to sell the asset
D)the inflation rate

Question 56

The prospectus is a legal document that offers securities or mutual fund shares for sale and explains the offer.

Question 57

Passive income is not one of the advantages of owning rental property.

Question 58

Which is not a step for successfully flipping real estate?

A)Find property to buy
B)Depreciate the property
C)Fix up and add value to the property
D)Resell the property