Making A Sound Investment Decision - IELTS Reading Answers & Explanations
From Succeed in IELTS Academic Reading Test 9 · Part 3 · Questions 27–40
Reading Passage
You should spend about 20 minutes on Questions 27 - 40, which are based on Reading Passage 3 below.
Making a sound Investment Decision
As investors tire of stock market instability, the idea of owning a piece of real estate is gaining in popularity. Now, not everyone has what it takes to become a landlord, but if you can make a go of it, it certainly has the potential to become a good money-earner. Here are some tips from successful real estate mogul, Janet Anderson, on how to start building up your property portfolio.
According to Janet, one of the best ways to identify a bargain is to hunt for foreclosures. Foreclosures are properties banks have repossessed because their owners were unable to meet the mortgage repayments. Banks want a quick sell on these places, Janet says. They want to cut their losses and get their money back as quickly as possible. Developing a network - making connections with city clerks and bank employees who know which properties are about to be sold - can be an excellent way to identify such bargains. And bargains they certainly can prove to be; in a recent firesale auction ('firesale auction' is the phrase that has been coined to describe auction-room events dedicated entirely to the disposal of repossessed assets) a house with a market value nearing $1,000,000, but with a low reserve price designed to encourage bidders and secure a quick sale, went for $450,000; that's a whopping 55% discount.
It's also important to be realistic though and not stretch yourself too far financially. Janet says the biggest mistake you can make is to borrow too much or over-borrow. For first-time investors, lenders usually demand bigger down payments because you haven't got a proven track record. That's more of your money on the table and, therefore, should anything go wrong, you're in for a big financial hit.
Her business partner, James Nylles, is in complete agreement on this point. He also highlights the fact that the mortgage payments and deposits are only part of the long-term cost of buying a rental property. There is also the cost of repairs, administration and maintenance, rental manager's fees, insurance and so on, all of which require you to hold a significant amount of money in reserve. Failure to factor this in when calculating how much you can afford to part with in mortgage repayments can lead to disaster.
One of the biggest traps for first-time investors, according to Nylles, is the temptation to pay over the odds to get the property you desire. Buyers often get carried away, especially in the auction-room setting, which can get quite competitive and even descend into a racket of one-upmanship. They end up paying top-dollar and landing themselves in a financial situation they can ill afford to be in. Remember, you are in the property game to make money, so the more money you have to pay upfront for a property, the less likely you are to recoup your investment in the long run. The good news, however, is that the housing market is not very hot at the moment, which means the danger of overpaying is not so great. Always set emotions to one side and think from a purely business perspective. The question of your liking or disliking the property is irrelevant. As Nylles points out: “you will not be living there.” Business decisions are made in the cold hard light of day; your objective is to minimise your outlay and maximise your return. Whether you secure a huge home in pristine condition or a tiny flat with barely room to stretch in is irrelevant - if the tiny flat gets you a better return on your investment then the choice is a no-brainer.
And last of all, do your homework. You've got to get to know the location in which you are going to invest. Look out for areas which are earmarked for government investment. Urban renewal areas are often very attractive since house and rental prices in such places are low right now but can be expected to rise in the not too distant future. The range of local amenities, safety and the state of the local economy are all important factors to consider, too. As the old saying goes, 'location, location, location'. Invest in a good location and you will maximise your rental income.
Questions
Questions 27–33 Short Answers
Answer the questions below using NO MORE THAN THREE WORDS for each answer.
Questions 34–40 Yes / No / Not Given
Do the following statements agree with the information given in Reading Passage 3?
Write
YES if the statement agrees with the information
NO if the statement contradicts the information
NOT GIVEN if there is no information on this
Answers & Explanations Summary
| # | Answer | Evidence | Explanation |
|---|---|---|---|
| Q27 | stock market instability | As investors tire of stock market instability, the idea of owning a piece of real estate is gaining in popularity | Excerpt/Passage Explanation: The passage explains that people who invest money are tired of the stock market going up and down unpredictably, so they are becoming more interested in buying property instead. Answer Explanation: The answer means that the stock market is unpredictable and changes quickly, which makes people unhappy or worried. Reason For Correctness: The correct answer is found in the very first sentence of the text. The question asks what investors are "getting fed up with" (which means getting tired of or annoyed by). In the text, the phrase "tire of" has the same meaning as "getting fed up with." The text states that investors "tire of stock market instability." |
| Q28 | real estate | Here are some tips from successful real estate mogul, Janet Anderson, on how to start building up your property portfolio | Excerpt/Passage Explanation: The passage explains that Janet Anderson is an important and successful businessperson in the field of "real estate," which means the business of buying and selling properties. Answer Explanation: The answer refers to land, houses, and buildings that people can buy, sell, or rent. Reason For Correctness: The correct answer is supported by paragraph 1, which introduces Janet Anderson as a successful "real estate mogul" who gives advice on buying and building a portfolio of property. Therefore, "real estate" is the exact phrase used in that paragraph to describe property business. |
| Q29 | hunt for foreclosures | According to Janet, one of the best ways to identify a bargain is to hunt for foreclosures | Excerpt/Passage Explanation: The passage explains that searching for bank-repossessed homes is a great way to find a property at a very cheap price. Answer Explanation: The answer means looking for homes that banks took back from people who could not pay their loans. Reason For Correctness: The correct answer is directly stated in the second paragraph. The text says, "According to Janet, one of the best ways to identify a bargain is to hunt for foreclosures." The question asks what "one of the best ways to identify a bargain" is, matching the wording in the passage almost word-for-word. |
| Q30 | mortgage repayments | Foreclosures are properties banks have repossessed because their owners were unable to meet the mortgage repayments | Excerpt/Passage Explanation: The passage states that banks take back ownership of houses when the people who own them cannot pay their regular home loan payments. Answer Explanation: The answer means the regular payments of money that a person must make to the bank to pay back a loan taken out to buy a house. Reason For Correctness: The correct answer is confirmed in the second paragraph. The question asks what failing to pay can cause a person's home to be taken back by the bank (repossessed). The passage explains that foreclosures happen when banks take back properties because the owners "were unable to meet the mortgage repayments." Here, "unable to meet" matches the question's phrase "failure to meet". Therefore, the missing phrase is "mortgage repayments". |
| Q31 | their money | They want to cut their losses and get their money back as quickly as possible | Excerpt/Passage Explanation: The passage explains that the banks want to prevent further loss and return their own money to themselves as fast as they can. Answer Explanation: The answer means the money that belongs to the banks. Reason For Correctness: The correct answer is "their money" because the second paragraph discusses foreclosed houses and describes what banks desire when selling them. The text clearly states that banks want to reduce their losses and "get their money back as quickly as possible." Therefore, what banks want back quickly is "their money." |
| Q32 | bargains / bargain properties | Developing a network - making connections with city clerks and bank employees who know which properties are about to be sold - can be an excellent way to identify such bargains | Excerpt/Passage Explanation: The passage explains that talking to and making friends with bank and city workers helps you find houses that are being sold for very low, discounted prices. Answer Explanation: The answer means great deals or properties bought at very cheap prices. Reason For Correctness: The correct answer is correct because the second paragraph clearly discusses how building connections helps investors find properties at very low prices. The passage states that "Developing a network" with bank workers and city clerks is an "excellent way to identify such bargains." Therefore, what you find or identify through developing networks is "bargains" (or "bargain properties"). |
| Q33 | borrow too much / over-borrow | Janet says the biggest mistake you can make is to borrow too much or over-borrow | Excerpt/Passage Explanation: The passage clearly states that taking out too much loan money is the worst mistake a property investor can make. Answer Explanation: The answer means taking out more money in loans than you can safely manage to repay. Reason For Correctness: The correct answer is supported by the third paragraph, where the text discusses financial advice from Janet Anderson. She states that the "biggest mistake" a person can make is to "borrow too much or over-borrow." In the question, the phrase "biggest error of judgement" means the exact same thing as "biggest mistake." |
| Q34 | YES | For first-time investors, lenders usually demand bigger down payments because you haven't got a proven track record | Excerpt/Passage Explanation: The passage explains that when someone is a first-time investor, lenders (banks) require them to pay a larger amount of cash at the beginning because they have not yet shown experience in property investing. Answer Explanation: The answer "YES" means that the text confirms banks or lenders ask for more initial money (a bigger deposit) from people who are investing in property for the first time. Reason For Correctness: The correct answer is YES because the passage clearly states that lenders ask for larger upfront payments from people investing for the first time. In the text, the keyword "lenders" corresponds to "banks", "demand" matches directly, and "bigger down payments" means the same thing as "larger deposits". |
| Q35 | NO | For first-time investors, lenders usually demand bigger down payments because you haven't got a proven track record. That's more of your money on the table and, therefore, should anything go wrong, you're in for a big financial hit | Excerpt/Passage Explanation: The passage explains that when beginners have to pay a larger down payment (deposit), more of their own money is in danger, so they will lose a lot of money if problems happen. Answer Explanation: The answer "NO" means that the statement is false according to the text. Reason For Correctness: The correct answer is NO because the statement says a larger deposit reduces or limits an investor's personal financial risk, but the text says the opposite. In the text, a "down payment" is another word for a deposit. The author explains that when investors make bigger down payments, they put more of their own money at stake, meaning they will suffer a "big financial hit" if something goes wrong. Therefore, a larger deposit increases financial risk instead of limiting it. |
| Q36 | YES | He also highlights the fact that the mortgage payments and deposits are only part of the long-term cost of buying a rental property. There is also the cost of repairs, administration and maintenance, rental manager's fees, insurance and so on, all of which require you to hold a significant amount of money in reserve. Failure to factor this in when calculating how much you can afford to part with in mortgage repayments can lead to disaster | Excerpt/Passage Explanation: The passage explains that buying a rental home has many future expenses, like repairs, maintenance, management fees, and insurance. It warns that buyers must think about and calculate all these costs before buying. Answer Explanation: The answer "YES" means that the statement is true and completely matches the facts mentioned in the reading text. Reason For Correctness: The correct answer is YES because the text explains that buying a rental property involves many ongoing expenses beyond just mortgage payments and deposits. James Nylles mentions multiple extra costs, including "repairs, administration and maintenance, rental manager's fees, insurance and so on." He warns that people must "factor this in" (a synonym for "take into consideration") before deciding how much they can spend, or it could lead to disaster. |
| Q37 | NO | There is also the cost of repairs, administration and maintenance, rental manager's fees, insurance and so on, all of which require you to hold a significant amount of money in reserve | Excerpt/Passage Explanation: The passage shows that having extra reserve money is necessary because of the actual costs of fixing and taking care of the property, not because a bank demands it. Answer Explanation: The answer "NO" means that the statement is false according to the passage. Reason For Correctness: The correct answer is NO because the passage explains that the ongoing expenses themselves—such as repairs, maintenance, and insurance—require you to keep extra money saved, not the banks. If banks made it a mandatory requirement, an investor would not risk financial failure by forgetting to include these costs when planning mortgage payments. Key phrases to notice include "cost of repairs, administration and maintenance" and "all of which require you to hold a significant amount of money in reserve". |
| Q38 | YES | One of the biggest traps for first-time investors, according to Nylles, is the temptation to pay over the odds to get the property you desire | Excerpt/Passage Explanation: The passage explains that a very common mistake for new buyers is feeling tempted to pay higher prices than they really should in order to win the property they want. Answer Explanation: The answer "YES" means that the passage agrees with the statement that many investors feel an urge or desire to pay too much money for investment properties. Reason For Correctness: The correct answer is YES because the passage explicitly warns about this problem. James Nylles states that "the temptation to pay over the odds" (which means paying more than something is worth or more than one should pay) is one of the most common mistakes or "traps" for buyers, who often "get carried away" during bidding. |
| Q39 | NO | The good news, however, is that the housing market is not very hot at the moment, which means the danger of overpaying is not so great | Excerpt/Passage Explanation: The passage explains that right now, the property market is not booming or overly expensive, so buyers do not have to worry as much about paying too much money. Answer Explanation: The answer "NO" means that the statement is false according to the text. Reason For Correctness: The correct answer is NO because the text clearly states that the property market is currently not very active or expensive. The author notes that "the housing market is not very hot at the moment" and that the risk of paying too much is low. This directly contradicts the statement that house prices are generally extremely high right now. |
| Q40 | NOT GIVEN | Look out for areas which are earmarked for government investment. Urban renewal areas are often very attractive since house and rental prices in such places are low right now but can be expected to rise in the not too distant future | Excerpt/Passage Explanation: The passage tells investors to search for places where the government plans to spend money, such as urban renewal zones, but it gives no details about how many of these projects actually exist. Answer Explanation: The answer "NOT GIVEN" means that the text does not say whether there are many or few urban renewal projects chosen by the government. Reason For Correctness: The correct answer is NOT GIVEN because although the text advises buyers to search for areas "earmarked for government investment" and mentions that "urban renewal areas" can be great choices, it never mentions the number or quantity of these projects. We do not know if there are "a lot of" them or only a few. |