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
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