Post-License Ch14 Quiz Questions Only

Post-License Ch14 Quiz Questions Only – answers will be revealed with Post-License subscriptions

1 of 15 – Depreciation allows an investor of real estate an advantage over other types of investments like stocks, bonds, and mutual funds. What is that advantage?
Depreciation cancels out any taxes owed.
Depreciation makes cash flows tax free.
A guaranteed return is possible on real estate because of depreciation.
Cash flow is improved due to depreciation.

2 of 15 – Which would NOT be an advantage of real estate investment?
The use of leverage.
The ability to depreciate the cost basis.
Control and use of the asset is decided upon by the investor.
The large amount of capital needed to begin investing in real estate.

3 of 15 – Gill says his apartment investment lacks liquidity. What does Gill mean by liquidity?
Water access of the apartment
Ability to sell an investment quickly and for full value
High appreciation rate
High vacancy rate

4 of 15 – According to the IRS, an active investor of real estate would be defined as?
One who purchases at least three properties a year but does not manage them.
An individual that buys and sells shares of publicly traded REIT’s.
One who is involved in management or decision-making of the property.
An apartment owner that mows the lawn on his investment apartments.

5 of 15 – A six-unit complex, purchased for $399,000, has 4 two-bedroom units and 2 one-bedroom units. The two bedrooms rent for $800/month, and the one bedrooms rent at $700/month. The Loan to Value is 80%. The interest on borrowed funds is 7.5%, with a payment of $2,322 per month. Expenses are? Taxes of $2,400; Insurance at $2,000; Repairs of $2,622; and reserves are $10,800. Vacancy and collection loss is 5%. What is the Net Operating Income (NOI)?
$55,200
$34,618
$7,834
$4,000

6 of 15 – When participating in a “like-kind” exchange, an investor is able to?
Avoid paying income taxes.
Pay taxes on the installment plan.
Defer the capital gains tax until a later time.
Trade an investment property for a principal residence.

7 of 15 – When a hurricane hits the coastline and destroys residential and commercial property, what type of change has occurred?
Economic change.
Cyclical change.
Physical change.
Social change.

8 of 15 – If a property has a capitalization rate of 25%, this is an indication that?
The property has a high level of risk associated with ownership.
The buyer has made a low-risk investment.
The property is in very good condition.
The buyer made a very large down payment (50+%).

9 of 15 – A six-unit complex, purchased for $399,000, has 4 two-bedroom units and 2 one-bedroom units. The two bedrooms rent for $800/month, and the one bedrooms rent at $700/month. The Loan to Value is 80%. The interest on borrowed funds is 7.5%, with a payment of $2,322 per month. Expenses are? Taxes of $2,400; Insurance at $2,000; Repairs of $2,622; and reserves are $10,800. Vacancy and collection loss is 5%. What is the Potential Gross Income?
$57,600.00
$55,200
$52,440
$50,400

10 of 15 – A six-unit complex, purchased for $399,000, has 4 two-bedroom units and 2 one-bedroom units. The two bedrooms rent for $800/month, and the one bedrooms rent at $700/month. The Loan to Value is 80%. The interest on borrowed funds is 7.5%, with a payment of $2,322 per month. Expenses are? Taxes of $2,400; Insurance at $2,000; Repairs of $2,622; and reserves are $10,800. Vacancy and collection loss is 5%. What is the Equity Dividend rate?
8.46%
11.25%
12%
13%

11 of 15 – A six-unit complex, purchased for $399,000, has 4 two-bedroom units and 2 one-bedroom units. The two bedrooms rent for $800/month, and the one bedrooms rent at $700/month. The Loan to Value is 80%. The interest on borrowed funds is 7.5%, with a payment of $2,322 per month. Expenses are? Taxes of $2,400; Insurance at $2,000; Repairs of $2,622; and reserves are $10,800. Vacancy and collection loss is 5%. Figure the Debt Service Coverage ratio.
98%
110%
124%
85%

12 of 15 – A six-unit complex, purchased for $399,000, has 4 two-bedroom units and 2 one-bedroom units. The two bedrooms rent for $800/month, and the one bedrooms rent at $700/month. The Loan to Value is 80%. The interest on borrowed funds is 7.5%, with a payment of $2,322 per month. Expenses are? Taxes of $2,400; Insurance at $2,000; Repairs of $2,622; and reserves are $10,800. Vacancy and collection loss is 5%. What is the Cash Break Even ratio?
33.99%
63.20%
73.00%
98.00%

13 of 15 – The NOI for a particular property is $69,000, and the annual mortgage expense is $37,399. In this scenario, the debt service coverage ratio is?
0.542
1.85
2.02
2.67

14 of 15 – The Green Apartments have an estimated value of $600,000 and a net operating income (NOI) of $48,000. If the annual mortgage expense is $172,000, what is the capitalization (CAP) rate?
8%
13.50%
6%
36%

15 of 15 – A buyer had $200,000 cash for a real estate investment. After looking at many types and classifications of property, the investor decided upon an apartment complex over some acreage. What is one reason why the investor would NOT choose the acreage?
Apartment complexes have a better rate of appreciation than land.
Vacant land cannot be depreciated and has no income stream.
Vacant land without water is worthless.
Apartment complexes have positive cash flow.

Post-License Ch14 Quiz Questions Only