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9. If an investor buys a property for $500,000 and puts down a $200,000 deposit

ID: 423054 • Letter: 9

Question

9. If an investor buys a property for $500,000 and puts down a $200,000 deposit what will the equity buildup be after 5 years if the mortgage is reduced by $20,000 and he sells for $550,000?

a. $70,000

b. $50,000

c. $250,000

d. $280,000

e. None of the above

10.An investor pays $650,000 for a property investment at auction. The property delivers $26,500 gross rental per annum with 5% outgoings. What is the net return?

a. 9.06%

b. 1.96%

c. 3.87%

d. 13.25%

e. 8.04%

11. What is the meaning of ‘Eminent Domain’ in a property context?

a. The Crown can resume ownership of privately held land by due process

b. Reserve areas are held by territorial authorities

c. The Torrens system overrides prior Deed ownership

d. Rating valuations are the basis of land taxation

e. None of the above

12. Where is a building covenant used?

a. In a location where a territorial local authority intends to build a public facility

b. To ensure a particular standard of house construction

c. By a valuer to place a limit on the conclusion reached

d. Where the Crown intends to recover taxes owing

e. To ensure properties do not become land locked

Explanation / Answer

9. Property bought at $500,000

Deposit paid: $200,000

Amount left: $300,000

After 5 years mortgage reduced by $20,000 hence $300,000-$20,000= $280,000

Property sold for $550,000

Equity buildup= Assets- liabilities= Price at which property sold- amount he still owes= $550,000-$280,000=$270,000

Hence the right answer is e) None of the above

10. investment on property: $650,000

Annual rent received from property: $26,500

5% outgoing= 0.05*26500= $1325

actual rent received=$26,500-$1325= $25175

net return= 25175/650000= 0.038= 0.0387*100= 3.87%

hence the right answer is c)3.87%

11. a. The Crown can resume ownership of privately held land by due process

12. b. To ensure a particular standard of house construction