Investment (Property) 5

Question 1

What is the '1% rule' often used by rental investors?

Accepted Answer

Monthly rent should be at least 1% of the purchase price

Answer

The 1% rule is a screening guideline suggesting monthly rent be about 1% of the price.

Question 2

What is 'forced appreciation' in real estate?

Accepted Answer

Increasing value through renovations or better management

Answer

Forced appreciation raises value through improvements or higher income, not just market trends.

Question 3

Which document outlines the rights and obligations between a landlord and tenant?

Accepted Answer

The lease agreement

Answer

A lease agreement defines the terms, rent, and responsibilities of both landlord and tenant.

Question 4

What is a key advantage of holding rental property long-term?

Accepted Answer

Mortgage paydown builds equity while rents may rise

Answer

Over time tenants help pay down the loan, building equity, while rents and value can grow.

Question 5

What does 'vacancy rate' indicate for a rental investment?

Accepted Answer

The percentage of time units are unoccupied

Answer

Vacancy rate shows how often units sit empty, directly reducing income.

Investment Practice Test