Key Terms - Chapter 20

Question 1

appreciation

Answer 1

An increase in property value

Question 2

cash flow

Answer 2

Regular income produced by a rental property after deducting operating expenses and debt service.

Question 3

leverage

Answer 3

The use of borrowed funds, which allows an owner to control an investment greater than the owner’s equity in the investment. The larger the percentage of borrowed money, the greater the leverage.

Question 4

liquidity

Answer 4

The ability to convert an asset into cash.

Question 5

return on investment

Answer 5

The amount of money that is obtained relative to the amount that was initially invested.