Final CE Shop Study Guide Exam Questions And Correct Answers
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Course
CE Shop
Institution
CE Shop
Final CE Shop Study Guide Exam Questions
And Correct Answers
Cash-on Cash return
1: A comparison of before-tax cash flow to cash invested
2: A rate of return that calculates the cash income earned on the total cash invested
Building specifications
1: Unlike most construction documents, this o...
Final CE Shop Study Guide Exam Questions
And Correct Answers
Cash-on Cash return
1: A comparison of before-tax cash flow to cash invested
2: A rate of return that calculates the cash income earned on the total cash invested
Building specifications
1: Unlike most construction documents, this one is in writing. Often called "Written narratives"
because specifications describe the features, materials and products to be used in construction.
Commercial and investment properties: Characteristics of investments
1-52
Mortgage REITs
1: Don't buy properties, but instead invest in real estate debt.
2: Some of them made loans in the past, but now most buy commercial and residential mortgage-
backed securities.
3: Many focus on buying mortgage securities guaranteed by Freddie Mac and Fannie Mae.
4: ---- make money by incurring short-term debt to acquire longer-term mortgage securities,
earning the spread between the two rates.
5: During periods when the Federal Reserve keeps short-term interest rates low (to stimulate the
economy), ---- are popular investments because they reduce the --- borrowing costs.
Equity REITs
1: Purchase properties
2: --- make money primarily from their properties' rents and tend to specialize in owning certain
building types (such as apartments, regional malls, self-storage, office buildings or hotels
3: ----- are registered with the SEC regardless of whether they are public (and therefore listed on
major stock exchanges) or private.
4: most likely to be part of an equity REIT’s investment? Retail shopping centers
Covenant against encumbrances
1: This is when the grantor assures to the grantee that outside of public records and whats in the
deed, there are no encumbrances against the title.
Quitclaim Deed
1: A deed that transfers property quickly
2: This gives the property to the new owner without making any promises about the title.
Referee's Deed
1: A deed that does not offer any warranties or agreements but does imply ownership.
2: often used in bankruptcy proceedings and foreclosures
Devisor
1: The person who writes the will is called this.
2: The person receiving the will is the devisee.
Federal fair housing act 1968
1: Color, religion, national origin were added as a protected class.
2: Prohibits discrimination based on race, religion, color, and national origin in the sale or rental
of residential real estate
Ex. The Federal Fair Housing Act of 1968 also created the Office of Fair Housing and Equal
Opportunity.
3: created the Office of Fair Housing Equal Opportunity (OFHEO)
Fair Housing amendment Act
1: I988. Disability and familial status was added as a protect class.
Shared Equity Mortgage
1: This is used most often in commercial lending.
2: The borrower agrees to the lender's participation in the net income from the commercial
property or enterprise in order to obtain the loan.
1031 Tax Deferred exchange (Named after section 1031 of internal revenue code)
1: Allows investors to sell a property and reinvest the proceeds into a new property (as part of a
qualifying like-kind exchange) while postponing the payment of capital gain taxes.
2: The investment must be held for business / investment purposes.
3: Proceeds from the sale must be passed through the hands of a qualified intermediary.
4: The replacement property must involve and equal or greater level of debt than the property
sold.
5: Foreign investors may participate.
6: Property identification within 45 days. Closing within 180 days.
Six relevant IRS Rules
Rule 1: Properties are of like-kind if they're of the same nature or character, even if they differ in
grade or quality. Example - an apartment building would generally be like-kind to another
apartment building.
Rule 2: The basis of the original property carries over to the new property. It doesn’t change. So
if your investor has a property worth $500,000 with a basis of $100,000, and then exchanges it
for a property also worth $500,000, the basis in the new property is $100,000 plus any new debt
taken on and any cash paid out.
Rule 3: The new property has to come with the same or greater debt load for the investor. If it
doesn’t, the investor is liable for paying the gain on the difference.
Rule 4: The investor has to use a qualified intermediary (QI) to conduct the exchange. This
means that your clients can’t do the exchange for themselves. The intermediary must be a person
who has NOT worked with the investor within the last two years.
Rule 5: The investor has 45 days from the day of closing on one property to identify and commit
in writing to the next property. The investor has 180 days from the date the original property
closes to close on the new investment property.
Rule 6: The 1031 must be disclosed to the buyer. At the time of the sale and at the time of the
purchase, you have to tell the parties to the transactions that you’re doing a like-kind exchange—
and get the disclosure in writing.
Similarities of real estate and business brokerages
2: They both involve the sale of real property or the assignment of a long-term lease.
Real Estate Business
1: It deals solely in real property: buying, selling, and leasing.
2: Working as a real estate brokerage requires a sales associate or broker license.
3: Real estate professionals can specialize in the following areas:
ResidentialCommercialIndustrialAgriculturalBusinesses
Business Brokerage
1: A business brokerage involves assets other than real estate, such as:
- Personal property concern value
- Goodwill—intangible asset derived from a business’s established reputation.
- Going-concern value
2: It has a geographically wider market scope.
3: Working for a business brokerage requires expertise in corporate finance, business accounting,
and business valuation.
Multi-Family Dwellings
1: These are designed for more than one household. However, when speaking with other real
estate professionals, "multi-family" means five or more dwelling units per building.
Single Family Dwellings
1: This property category has a wide market, so some investors opt to include only single-family
residences in their real estate portfolio.
Business Risk
1: What you thought you'd earn and spend vs what you actually earned and spent.
Buying power risk
1: This risk is caused by inflation.
Interest Rate risk
1: When interest rates go up, value of investment goes down.
Liquidity Risk
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