Real Estate Investing Real Estate Financing Methods 2

Question 1

What is a 'blanket mortgage' used for in real estate investing?

Accepted Answer

Covering multiple properties under one loan

Answer

A blanket mortgage covers multiple properties under a single loan, commonly used by developers and investors acquiring several properties at once.

Question 2

In a seller carryback arrangement, who acts as the lender?

Accepted Answer

The property seller

Answer

In a seller carryback (also called owner financing), the seller extends credit to the buyer, essentially acting as the lender.

Question 3

What does LTV stand for in real estate financing?

Accepted Answer

Loan-to-Value

Answer

LTV (Loan-to-Value) is the ratio of the loan amount to the appraised value of the property, used by lenders to assess risk.

Question 4

Which loan type allows investors to use equity in existing properties to fund new purchases?

Accepted Answer

Home Equity Line of Credit (HELOC)

Answer

A HELOC allows investors to borrow against the equity built in existing properties to fund additional real estate purchases.

Question 5

What is the primary advantage of an adjustable-rate mortgage (ARM) for a short-term investor?

Accepted Answer

Lower initial interest rate during the introductory period

Answer

ARMs offer a lower initial rate during the introductory period, which benefits short-term investors who plan to sell before the rate adjusts.

Real Estate Investing Practice Test