REALTOR® Magazine Online: The real estate professional's business support tool.
OFFICIAL MAGAZINE OF THE NATIONAL ASSOCIATION OF REALTORS®

QUIZ: Real Estate Investment

 To be a savvy real estate investor you must be able to understand market conditions, assess how much time and money it'll take to rehab properties, and know how to deal with tenants and building maintenance. It’s not easy, but it can be highly profitable if you know what you’re doing.

1.Before you invest in real estate, you should:
Look at sales activity and home prices of neighborhoods in which you'd like to invest. Examine market data over the past several years to look for trends
Consider the number of single-family homes versus multifamily properties in the neighborhood and find out which way development is trending
Compute the ratio of tenant-occupied and owner-occupied properties, and try to decipher a trend
All of the above


2.You invest in single-family houses that you rehab and resell, usually within six months. Your goal is a 15 percent profit. You've had your eye on one fixer-upper, and when it finally goes on the market, you jump. Unfortunately, so do three other people, driving up the price beyond what you expected to pay. Should you:
Pay as much as it takes to get the property. If so many other investors are interested, it's probably worth it
Gauge the market, along with the potential costs and time to make repairs, to determine whether a higher price is warranted
Forget about it; it's not worth the trouble. It's better to find properties that no one else wants


3.Once you've identified a single-family investment property that you're interested in buying for investment, you should:
Visually inspect the property yourself to ensure it's structurally sound
Bring in a qualified home inspector for an inspection
Go beyond the standard home inspection


4.Five real estate investment "tools" that can lead you to wealth are:
Cash flow, amortization, leverage, appreciation, and the tax advantages of real estate investing
Market knowledge, return on investment, nice tenants, cyclical markets, and negotiating skill
Life, liberty, comedy, tragedy, and the pursuit of happiness


5.You're investing in a market that has cooled off. Your best strategy might be to:
Stop looking for investments until the market turns up again
Look for investments that you can buy, hold, and rent out until the market turns up again
Get a warm parka


6.With a lease-option arrangement you:
Negotiate a long-term commitment with a property owner for a low monthly rent that allows you to sublease to a tenant and gives you or the tenant the right to purchase at any time
Have the opportunity to build equity in a property through lease payments before you formally buy the property
Make an agreement with tenants to lease part of a property you own with an option of adding space in the future
The first two answer choices
None of the above


7.A 203(k) is:
A federal tax-deferred savings plan that can be used for making real estate investments
An FHA mortgage insurance program that allows the cost of rehabilitation on a home to be built into the mortgage
The portion of the federal tax code that covers real estate depreciation