Chapter 9

1.) Only if an investor borrows money but does not have any financial liens then there is no financial risk. F-borrows no money and no liens p233

2.) Real estate investors are also allowed to depreciate property improvements. T-p239

3.) FEMA is an agency for collateral in flood-prone areas where flooding can destroy real estate. T-p235

4.) Management fees are paid out through escrow and usually at a percentage between 20%-25% of effective gross income. F-paid out of rental collections at 3%-18% p233

5.) The two major tax benefits that are found in real estate investing are:

a) Mortgage principle deduction & taxable income deduction

b) Book value deduction & noncash deduction

c) Mortgage interest deduction & taxation depreciation deduction –p238

d) None of the above

6.) Which of the following are reasons why investors are not against depreciation:

a) They can control when capital gains are paid and if they get paid

b) Tax deduction tone day rather than the same deduction in the future

c) Lower capital gains tax rates than income tax rates

d) All of the above –p239-240

7.) The return to the equity investor is influenced by:

a) Overall rate of return

b) Effects of leverage

c) None of the above

d) Both a&b -p241

8.) The following are all risks of real estate:

a) Inflation

b) Opportunity cost

c) Assets

d) Both a & b – p231