Alternative Investments

Correct Answer: Income capitalization approach

The income capitalization approach is the best answer for estimating the value of a real estate property based on the income it generates. This approach calculates the property's value by dividing the net operating income by the capitalization rate. It directly considers the income-producing potential of the property. The sales comparison approach looks at recent sales of similar properties, but does not focus on the income generated by the property itself. The cost approach estimates the value based on the cost to build or replace the property, but also does not consider the income it produces.

Correct Answer: Sales comparison approach

The sales comparison approach is the most common method used to estimate the value of a real estate property based on recent sales of comparable properties. This approach involves analyzing recent sales of similar properties in the same market area and making adjustments for differences in size, condition, location, and other factors to determine the estimated value of the subject property. The income capitalization approach and cost approach are also used in real estate valuation, but they are not as commonly used for estimating property values based on comparable sales.

Correct Answer: Commodity futures contracts

Commodity futures contracts are the correct answer here, as they are not typically considered a type of real estate investment. Residential properties, such as single-family homes and apartments, are a common form of real estate investment. Investors can purchase these properties to rent out to tenants or to hold for long-term appreciation. Similarly, commercial properties like office buildings and retail spaces are also popular real estate investments. These properties can generate rental income from businesses that lease the space. Commodity futures contracts, on the other hand, are agreements to buy or sell a specific quantity of a commodity at a predetermined price on a future date. These contracts are traded on exchanges and are used for hedging or speculating on price movements of commodities like oil, gold, or agricultural products. They are not directly tied to real estate.