Summer II 2014FIN 431Real Estate InvestmentsSummer II 2014Instructor: J. Edward Graham Phone:[email protected] 962-3516 (Office)(www.csb.uncw.edu/people/edgraham/) 796-0864 (Home)Office: Dept. of Economics & Finance Room 220-NOffice Hours: Monday through Thursday mornings before class, and after class each day.Excepting the 4th of July and lunch, I will be in my office most days until mid-to-late-afternoon. I generally arrive early, before 9:00. Text: Real Estate Investment, 7th Edition, by Wiedemer, Goeters, and Graham, 2010/11. Course Packet available at the bookstore. Selected “case studies” and investment examples from the instructor.OBJECTIVES:The primary objective of this course will be to extend a student’s basic understanding offinance and of real estate to an appreciation of real estate value. Towards thisappreciation, an initial illustration of the inefficiencies in real estate vs. capital marketinvestments will be provided. The real estate/financial crisis will be reviewed. Theinstructor will provide a monograph on this topic. A number of other current topics in realestate investment analysis will then be considered. These topics include the mathematicsof real estate investment, real estate financing alternatives, and special tax-deferral andtax-sheltering options available to the real estate investor. The course will includeexaminations of selected real estate investments and a review of career opportunities inreal estate sales and real estate finance. Each year, a half dozen or more of the FIN 431students land jobs in real estate (real estate finance, real estate appraisal, mortgagebrokerage, real estate banking, property management, etc), making this portion of thecourse especially important. Field trips will augment the understanding of real estateinvestment.PREREQUISITE: FIN 335 and FIN 331 (FIN 331 waived with instructor approval)FORMAT:Classes will consist of both lectures and discussion. Topics covered in the textbook andsupported by cases will be considered. Textbook readings and problem sets assignedshould be reviewed prior to the class in which the material is presented. Questions andcomments are strongly encouraged.The importance of the classes cannot be overstated. Attend every class. If sufficient timeis spent preparing (allow at least ten (10) hours per week outside the classroom), theobjectives of the course can be achieved. Appointments with the instructor for extra help,if needed, can be easily arranged.STUDENT RESPONSIBILITIES:Students should bring the textbook, all handouts and a calculator to class. Universitypolicy on attendance is applicable. A portion of the student’s grade is a function of classparticipation. As the term develops, students will be called upon to support thediscussion. GRADING: Attendance, attire, attitude 10%EXAM I 40%EXAM II 30%Property Project – Team Effort 20%92-100 A90-91 A-88-89 B+82-87 B80-81 B-78-79 C+72-77 C70-71 C-67-69 D+62-66 D60-61 D-Below 60 Not goodThe grading information is provided above, but should never become our primary focus. If weall do our work, the grades will take care of themselves. The examination and class schedule follow. Make-up exams will not be given without a validexcuse per University policy.The Property Project will be discussed just after Exam I.Class ScheduleSummer II, 2014Monday Tuesday Wednesday ThursdayJune 23 Classes BeginAll assigned questionsand problems that followare dandy tools to use inyour exam preparations. Chapters 1 & 3Introduction to real estateinvestment.Chapter 1 Notes (1)Efficiency remarks (1)Our first couple of deals(2)Great Recession Remarks(5-16)Housing Index (17)Questions in Chapter 1: 1,2 and 11-15.June 24 Parenthetical numbers initalics refer to pages in thecourse packet.BA-II Plus ReviewSheet (BA2R)(On Dr. Graham’s web-site)Sub-Prime/RefinancingExample (22)Loan Amortization Table(24)Note: The FIN 431 Websiteis a repository of many tools,homework solutions, etc.June 25 Brief CalculatorApplications Review.Discuss GreenInitiatives, GlobalWarming and theimplications for the realestate investor.Real Estate Value,Appraisals (26-71)June 26 Environmental Issues inChapter 3. Q’s in Ch. 3: 1–5, 8, &10.Investment analysis.Talk about TiffanyMarble and industrialwarehouse investment. US 1 Multi-tenantProperty (95-97) Ratio analyses. (DSCR,EDR) June 30 Forms of real estateownership. Chapter 9.Table 9-1 on page 174 inthe text. Q’s in Ch. 9: 1-7.CG Properties.Table 9-1 (25)Loan Commitment (108)Sub-S and LLCAlternatives.Introduction to real estate’sspecial treatment of taxesin Chapter 6. Q’s in Ch. 6: 1 – 5, 7, 8, &10.July 1 Property taxes and incometaxes. Installment sales andtax-deferred propertyexchanges in chapter 7.More tax work, the CFBTand the CFAT (a second orthird peek).A look at a tax-deferredproperty exchange. Theimpact of debt use.Section 1031 Case Study(73-85)Q’s in Ch. 7: 1-4 and 6-9 Chapter 7 Notes (72)July 2 Section 1031 Tax Form(83-84) Great RecessionRemarks (5-16)What were youexpecting in this realestate investmentsclass, and how can webetter fulfill yourexpectations in theweeks ahead? July 3 Single familydwellings andcondominiums. Chapter 8Q’s in Ch. 8: 1, 2, and8-11. Chapter 8 Notes(93)July 7 Conclude single familydwelling review, and begina fresh look at thefinancing of real estateinvestments in chapter 10.Chapter 10 Notes (94)DSCR, LTV, EDR andother fun acronyms.Examples 10.1, 10.2, and10.3 pages 185-187.Q’s in Ch. 10: 1, 2, 4, 10,11, and 12. Illustrative Data,Mortgages (95-105)July 8 We will do some“traditional” work in theclassroom today, and willdepart mid-class for our firstfield trip. A field trip, weatherpermitting.The class and the instructorwill discover a suitableinvestment property nearbyto visit. The class is invited,beforehand, to bring theirideas for an appropriate siteto the class. July 9 DSCR, LTV, EDR and otherfun acronyms. Again.The special mathematics ofreal estate investment. Re-examine a couple of thereal estate deals earlierconsidered. Exam I Review. This willbe a full class!Project Group