Quiz: Advanced Strategies

10 Questions | Passing Score: 70%

Test your understanding of Subject-To, Seller Financing, Lease Options, Novation, and Joint Ventures

1. What is a Subject-To deal?

A. Buying a property with seller financing at a negotiated interest rate B. Taking over existing mortgage payments while leaving loan in seller's name C. Renting a property with option to purchase later D. Partnering with another investor on a flip project

Correct Answer: B - Subject-To means taking over mortgage payments while loan stays in seller's name

2. What is the biggest risk of a Subject-To deal?

A. Property might need expensive repairs B. Due-on-sale clause could trigger loan acceleration C. Interest rate might be too high D. Seller might change their mind

Correct Answer: B - Due-on-sale clause is the biggest risk, allowing bank to call loan due

3. In seller financing, who acts as the lender?

A. A traditional bank or mortgage company B. The property seller C. A hard money lender D. The title company

Correct Answer: B - The seller provides financing and receives monthly payments

4. What is a balloon payment?

A. The down payment at closing B. A large lump sum payment due at a specific future date C. Monthly payment amount in seller financing D. The earnest money deposit

Correct Answer: B - Full remaining balance due at specified date (e.g., 5 years)

5. What are the two components of a lease option?

A. Purchase contract and assignment agreement B. Lease agreement and option to purchase C. Earnest money and down payment D. Mortgage and promissory note

Correct Answer: B - Lease (rental) + Option (right to buy later)

6. In a lease option, is the option fee refundable?

A. Yes, always refundable B. No, typically non-refundable C. Only refundable if seller agrees D. Refundable after 6 months

Correct Answer: B - Option fee is non-refundable, seller keeps it even if tenant doesn't buy

7. What does a novation do to an existing contract?

A. Transfers your rights to a new buyer B. Completely replaces it with a new contract and releases original party C. Extends the closing date D. Cancels the deal entirely

Correct Answer: B - Novation replaces original contract, removing you entirely

8. In a joint venture (JV), what is a common profit split structure?

A. Money partner gets 90%, deal finder gets 10% B. 50/50 or 60/40 split based on contributions C. Deal finder gets all profit, money partner gets interest only D. Fixed $5,000 to each partner regardless of profit

Correct Answer: B - Common splits are 50/50 or 60/40 based on who brings what

9. Which strategy is best when the seller has little to no equity?

A. Cash purchase at 70% of ARV B. Subject-To or Lease Option C. Traditional assignment D. Joint venture with another investor

Correct Answer: B - Subject-To or lease option work when seller can't sell traditionally

10. Should you always use an attorney for creative financing deals?

A. No, attorneys are too expensive B. Yes, always consult a real estate attorney for proper documentation C. Only if the deal is over $500K D. Only needed for Subject-To deals

Correct Answer: B - ALWAYS use attorney for seller financing, Subject-To, novations, JVs, etc.

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Passing score: 7 out of 10 correct (70%)

Advanced Strategies Quiz