A real estate investor who uses leverage (borrowed money) to purchase property increases their potential:
Why Return on equity but also risk Is Correct
Answer A: Return on equity but also risk
Exam Tip: Finance
Finance questions often involve calculations. Master the T-bar method, understand the difference between conventional and government-backed loans, and know key ratios like LTV and DTI.
People Also Study
Related Alabama Questions
- An investor wants a 10% return on a $500,000 investment. What annual net operating income is needed?Real Estate Math
- A purchase money mortgage is created when:Finance
- In a purchase transaction in Alabama, the earnest money deposited by the buyer is typically applied at closing toward:Finance
- A real estate investor who borrows 70% of a property's value and pays the remaining 30% in cash has used leverage at a(n):Finance
- A borrower has a gross monthly income of $5,000 and monthly debt payments of $1,800. What is their back-end debt-to-income ratio?Finance
Key Terms to Know
A deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Math Concepts
Study This Topic
Practice More Alabama Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Alabama Quiz →