Real Estate Investing Real Estate Financing Strategies 2

Question 1

What is a 'subject-to' real estate deal?

Accepted Answer

Buyer takes title while the seller's existing mortgage stays in place

Answer

In a subject-to deal, the buyer takes ownership of the property but the existing mortgage remains in the seller's name and the buyer makes the payments.

Question 2

What is the primary risk to the seller in a 'subject-to' transaction?

Accepted Answer

Losing equity if the buyer defaults and the lender forecloses

Answer

If the buyer stops making payments, the lender can foreclose on the property, damaging the seller's credit since the mortgage is still in their name.

Question 3

What does LTV stand for in real estate financing?

Accepted Answer

Loan-to-Value ratio

Answer

LTV (Loan-to-Value) ratio is calculated by dividing the loan amount by the appraised property value, expressed as a percentage.

Question 4

A DSCR loan qualifies a borrower primarily based on:

Accepted Answer

The property's rental income relative to its debt payments

Answer

DSCR (Debt Service Coverage Ratio) loans are underwritten based on the property's income potential rather than the borrower's personal income.

Question 5

Which financing strategy involves borrowing against the equity in an existing investment property to fund a new purchase?

Accepted Answer

Cash-out refinance

Answer

A cash-out refinance replaces an existing mortgage with a larger one and gives the investor the difference in cash to deploy into a new deal.

Real Estate Investing Practice Test

Real Estate Investing Practice Test

Real Estate Investing Real Estate Financing Strategies 2