15. T marketing them to individual investors as mortgage-backed bonds. Marking the mortgage to market is the process of accumulating mortgage pools and F T property improvements must be included in the depreciable basis of the property. 16. F According to IRS rules, interest and real estate taxes incurred during construction of real 17. TF development loan before any of the new property owners can receive a clear title. A developer must sell all of the lots in a development project and repay the entire 18. T F permanent financing. Commitments for construction financing are usually contingent on commitments for 19. F A company estimates that the incremental cost of owning a parcel of real estate vs. leasing T will be 10%. The company expects a 12% rate of return on investments. Therefore real estate should be owned and not leased 20. Because accounting depreciation charges often exceed the true economic depreciation of F T real estate, the earnings of companies owning real estate typically understate the level of operating cash flow. 21. The benefits of equity buildup in a property are lessened over time because with an T F amortizing mortgage, an investor will lose some tax benefits each year as the interest portion of the payments decreases. 22. T F A property should be sold when the marginal rate of return falls below the rate at which funds can be reinvested. 23. T F Residential property is depreciated over 27.5 years where as non-residential property is depreciated over 31.5 years. 24. T F Because REITs are corporations, they are subject to double taxation 25. T F One benefit of leverage is that it allows investors diversify across several investments 26. A loan in which the lender receives a percentage of the net operating income from the property is known as a(n): (A) Participation loan (B) Accrual loan (C) Convertible loan