Finance
A Minnesota real estate investor uses leverage to purchase investment properties. Using leverage means:
APaying cash for all properties
BBorrowing money to finance a portion of the purchase, amplifying returns (and risks)✓ Correct
CInvesting in REITs rather than direct real estate
DUsing a 1031 exchange to defer taxes
Explanation
Leverage in real estate means using borrowed money (mortgage) to control a larger asset than could be purchased with available cash. Leverage amplifies both returns and losses.
People Also Study
Related Minnesota Questions
- A Minnesota investment property is purchased for $500,000. The down payment is 25%. What is the loan amount?Real Estate Math
- A Minnesota homebuyer uses a VA loan to purchase a $350,000 home with no down payment. The VA funding fee is 2.3%. How much is the funding fee?Finance
- A Minnesota property is purchased for $275,000 with a 10% down payment. The lender requires private mortgage insurance (PMI). PMI is typically required until the loan-to-value (LTV) ratio drops below what threshold?Finance
- A Minnesota investor purchases a property for $480,000 with 25% down. What is the equity at purchase and the initial loan amount?Real Estate Math
- A Minnesota property owner with 40% equity in their home wants to purchase a rental property. They could use which strategy to leverage their existing equity without selling?Finance
- A Minnesota property sells for $340,000. The down payment is 15%. The buyer obtains a 30-year mortgage at 5.875%. Using a factor of $5.92 per $1,000, what is the monthly P&I payment?Real Estate Math
- A Minnesota seller is providing a purchase money mortgage (seller financing). When the buyer defaults, the seller can foreclose using which Minnesota foreclosure method?Finance
- A buyer obtains a 30-year, $200,000 mortgage at 7% annual interest. Using the factor of $6.65 per $1,000 borrowed, what is the monthly principal and interest payment?Real Estate Math
Key Terms to Know
1031 Exchange
A tax-deferred exchange allowing investors to sell one investment property and reinvest proceeds in a like-kind property while deferring capital gains taxes.
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.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Earnest MoneyA deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.
Study This Topic
Practice More Minnesota Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Minnesota Quiz →