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Real estate investing quiz

Free real estate questions with answers and explanations: leverage and who pays your mortgage, house hacking, BRRRR, REITs, the 1% rule and cap rates, fixed vs adjustable mortgages, whether your home is an investment, leases and deposits.

Tap an answer to check it, or open "Show the answer" under each question. Every question comes from a free 3-minute lesson, linked under its answer. Educational content, not financial advice.

Question 1 of 21

What is 'leverage' in real estate?

  1. Renting instead of buying to keep cash free
  2. Using a loan to control a bigger asset
  3. Paying all cash to skip interest
  4. Getting a lower price from the seller
Show the answer

Answer: B · Using a loan to control a bigger asset

Leverage means borrowing to control an asset worth far more than your cash — it multiplies your gains (and risks).

📚 Learn it: Why Real Estate Makes Millionaires

Question 2 of 21US

FHA down payment for house hacking?

  1. 3.5%
  2. 15%
  3. 2.5%
  4. 20%
Show the answer

Answer: A · 3.5%

FHA loans need just 3.5% down with a 580+ credit score — and you must live in the property yourself.

📚 Learn it: House Hacking

Question 3 of 21

In BRRRR, what do the two R's right after 'Rehab' stand for?

  1. Repair, Remodel
  2. Resell, Reinvest
  3. Rent, Refinance
  4. Rent, Resell
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Answer: C · Rent, Refinance

Buy, Rehab, RENT, REFINANCE, Repeat. Renting creates income; refinancing pulls your cash back out.

📚 Learn it: BRRRR — The Investor's Cheat Code

Question 4 of 21

What must REITs do with most of their income?

  1. Pay at least 90% as dividends
  2. Reinvest 90% into new properties
  3. Pay 50% or more as dividends
  4. Pay 90% to the IRS as corporate tax
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Answer: A · Pay at least 90% as dividends

REITs are required by law to distribute at least 90% of taxable income as dividends — which is why they yield more than most stocks.

📚 Learn it: REITs — Real Estate Without the Landlord Calls

Question 5 of 21

A $300k property rents for $2,500/mo. Does it pass the 1% Rule?

  1. Yes — it's within 20% of $3,000
  2. Can't tell without knowing the mortgage rate
  3. Yes — $2,500 ≥ $300 (0.1% of $300k)
  4. No — $2,500 < $3,000 (1% of $300k)
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Answer: D · No — $2,500 < $3,000 (1% of $300k)

1% of $300,000 = $3,000/month. $2,500 rent fails. It doesn't mean it's a bad deal — but it means the cash flow will be tight.

📚 Learn it: Rental Property Math: Does the Deal Work?

Question 6 of 21

The danger of leverage is that it...

  1. Magnifies gains but leaves losses the same
  2. Magnifies losses just as much as gains
  3. Lowers your returns whenever prices rise
  4. Removes downside risk but caps your upside
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Answer: B · Magnifies losses just as much as gains

Leverage is a two-way multiplier — a price drop hits your invested cash just as hard.

📚 Learn it: Leverage — Why Real Estate Multiplies Money

Question 7 of 21

How is a primary home different from a true investment?

  1. It loses value every year once you move in
  2. It costs cash to own rather than paying you
  3. It can't rise in value the way stocks can
  4. It doesn't count toward your net worth
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Answer: B · It costs cash to own rather than paying you

You live in it and pay to maintain it; it doesn't generate income like a rental does.

📚 Learn it: Is Your Home Actually an Investment?

Question 8 of 21

What defines a fixed-rate mortgage?

  1. The payment stays fixed, but the rate floats with the market
  2. The interest rate and payment stay the same for the whole loan
  3. You pay only interest at a set amount for the whole loan
  4. The rate stays fixed for a few years, then resets yearly
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Answer: B · The interest rate and payment stay the same for the whole loan

Fixed means locked — your rate and principal-and-interest payment never change, which is predictable and safe.

📚 Learn it: Mortgages 101: Fixed vs Adjustable

Question 9 of 21

What does renters insurance cover that your landlord's insurance does NOT?

  1. Your personal belongings and liability
  2. Repairs to the built-in appliances
  3. Damage to the walls, floors, and roof
  4. Your rent if you lose your job mid-lease
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Answer: A · Your personal belongings and liability

Your landlord insures the structure; renters insurance covers YOUR stuff and your liability.

📚 Learn it: Renting Smart: Leases & Deposits

Question 10 of 21

Who effectively pays your mortgage on a rental?

  1. Your tenant
  2. The government
  3. You
  4. The bank
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Answer: A · Your tenant

Your tenant's rent covers the mortgage. They build YOUR equity while you sleep.

📚 Learn it: Why Real Estate Makes Millionaires

Learn it in the app: Real Estate lessons, free →

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Question 11 of 21

What IS house hacking?

  1. Flipping houses fast for a quick profit
  2. Finding hidden deals by scraping listing sites
  3. Buying foreclosures at auction below value
  4. Living free by renting out part of your home
Show the answer

Answer: D · Living free by renting out part of your home

You buy a multi-unit home, live in one unit, and rent the others — the rent covers your mortgage.

📚 Learn it: House Hacking

Question 12 of 21

Why is BRRRR powerful?

  1. You can buy each property with no money down
  2. Refinancing makes your mortgage debt disappear
  3. You recycle the same money into many deals
  4. Profits from each property deal are tax-free
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Answer: C · You recycle the same money into many deals

By refinancing out your invested capital, the same down payment can fund property after property.

📚 Learn it: BRRRR — The Investor's Cheat Code

Question 13 of 21

How do you invest in a REIT?

  1. Buy REIT shares like any stock through a brokerage
  2. Buy a share of a physical property through a realtor
  3. Apply for a REIT mortgage loan through your local bank
  4. Register with the SEC as a real estate investor first
Show the answer

Answer: A · Buy REIT shares like any stock through a brokerage

REITs trade on stock exchanges just like shares of Apple or Tesla. You can buy $100 worth through any brokerage.

📚 Learn it: REITs — Real Estate Without the Landlord Calls

Question 14 of 21

What does 'cap rate' measure?

  1. The maximum mortgage payment a lender allows
  2. Yearly price growth as a % of purchase price
  3. Annual net income as a % of property value
  4. Monthly rent as a % of the property price
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Answer: C · Annual net income as a % of property value

Cap Rate = (Annual Net Operating Income ÷ Property Value) × 100. A 7% cap rate means you'd earn 7% yearly on an all-cash purchase.

📚 Learn it: Rental Property Math: Does the Deal Work?

Question 15 of 21

Which real estate actually generates income?

  1. Investment / rental property
  2. Your home as it appreciates
  3. Neither
  4. A personal vacation home
Show the answer

Answer: A · Investment / rental property

Rentals pay you monthly; a primary residence mostly takes money to hold.

📚 Learn it: Is Your Home Actually an Investment?

Question 16 of 21

What is the main risk of an adjustable-rate mortgage?

  1. It can't be refinanced once the rate adjusts
  2. The lender can demand the balance when it resets
  3. Its starting rate is higher than a fixed loan's
  4. The payment can jump sharply when the rate resets
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Answer: D · The payment can jump sharply when the rate resets

ARMs start cheap but can climb when they adjust — dangerous if you have not moved or refinanced first.

📚 Learn it: Mortgages 101: Fixed vs Adjustable

Question 17 of 21

Best way to protect your security deposit on move-in day?

  1. Pay your first and last month's rent in full up front
  2. Get the landlord's verbal OK that everything looks fine
  3. Take dated photos or video of the unit's condition
  4. Sign the move-in checklist quickly so it's on record
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Answer: C · Take dated photos or video of the unit's condition

Dated photos prove what damage was already there, so you can't be charged for it later.

📚 Learn it: Renting Smart: Leases & Deposits

Question 18 of 21

Main benefit of house hacking?

  1. FHA lets you skip property tax
  2. Rent from tenants is tax-free
  3. FHA waives your mortgage insurance
  4. Tenants cover your housing cost
Show the answer

Answer: D · Tenants cover your housing cost

Your tenants' rent pays your mortgage, slashing or erasing your own housing cost while you build equity.

📚 Learn it: House Hacking

Question 19 of 21

What's the main advantage of REITs over owning physical real estate?

  1. Tax-free income — REIT dividends are never taxed by the IRS
  2. Stability — REIT prices barely move, even when stocks crash
  3. Liquidity — sell instantly, no tenants, no maintenance calls
  4. Guaranteed income — the law bars REITs from cutting payouts
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Answer: C · Liquidity — sell instantly, no tenants, no maintenance calls

REITs let you own real estate income without managing properties, dealing with tenants, or waiting months to sell. It's the liquid version.

📚 Learn it: REITs — Real Estate Without the Landlord Calls

Question 20 of 21

Why run property numbers BEFORE touring?

  1. Because sellers raise the price once they know you've toured
  2. To avoid emotional decisions on deals that can't cash flow
  3. It's optional — most deals work out fine once you've seen them
  4. Because lenders won't let you tour until they approve the numbers
Show the answer

Answer: B · To avoid emotional decisions on deals that can't cash flow

Falling in love with a property clouds judgment. Numbers first — only tour deals that mathematically work. Emotions belong after the math.

📚 Learn it: Rental Property Math: Does the Deal Work?

Question 21 of 21

Why read the entire lease before signing?

  1. Most leases let you leave early at no cost if you give 30 days' notice
  2. It's mostly a formality, but reading it can help you negotiate lower rent
  3. Landlords can change any term after you sign, so you should know where you're starting
  4. Breaking it early can cost months of rent, and it binds you to its fees and rules
Show the answer

Answer: D · Breaking it early can cost months of rent, and it binds you to its fees and rules

A lease is a binding contract — the term, late fees, and deposit rules all bind you, so know them up front.

📚 Learn it: Renting Smart: Leases & Deposits

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