FINC 475 EXAM ONE
20 Cards in this Set
Front | Back |
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Real Estate
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Land plus improvements. Improvements are anything reasonably attached/affixed to land.
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6 most important things in real estate
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LOCATION LOCATION LOCATION
TIMING TIMING TIMING
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Potential Careers in Real Estate
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Brokerage, Management, Finance, Appraisal, Consulting, Development & Construction, Corporate Asset Management, Public Sector
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The Seven Special Characteristics of Real Estate
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1. Fixed Location
2. Uniqueness
3. Interdependence of Land Uses
4. Long Life
5. Long-term commitments
6. Large transactions
7. Long gestation periods
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Four Types of Real Estate
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1. Residential
2. Commercial
3. Industrial
4. Ranch/Agricultural
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Residential Real Estate
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Ex: Single-family attached and single-family detached
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Commercial Real Estate
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Ex: could be any of the following - retail, office, warehouse, medical, hospitality, education, religious
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Industrial Real Estate
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Ex: manufacturing plant and oil & gas refineries
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Ranch/Agricultural Real Estate
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Ex: could be any of the following - recreational land, cattle production, farmland, wildlife refuge, wetlands
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Three sectors of real estate that outperformed the market
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Residential, apartments, manufactured housing
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Four sectors of real estate that underperformed the market
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Industrial, office space, retail, lodging/resorts
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Who invests in Real Estate?
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Individuals, users, & institutions (pension funds, REITS, insurance companies, banks and savings & loans, foreign institutions, and private funds)
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How has real estate changed from 1988-2010?
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More and more money is being invested in real estate. In particular, large private equity firms are investing quite a bit of money.
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Four types of real estate investments
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1. Public Equity - Real Estate Investment Trusts
2. Public Debt - Commercial Mortgage-Backed Securities
3. Private Equity - Property
4. Private Debt - Loans
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Key difference between public and private real estate investments
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Private real estate investments require active real estate management, whereas public real estate investments involve passive real estate management
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Key difference between debt and equity investing
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Debt returns income only whereas equity returns income plus capital appreciation. Equity is also more risky than debt.
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Three Approaches to Value
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1. Appraisal based
2. Cost to construct
3. Income approach
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Real Estate securities valuation methodologies
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Dividend discount model
Capital asset pricing model
Net asset value per share
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Steps for the investment decision process
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1. Estimate the stream of expected benefits
2. Adjust for timing differences among expected streams of benefits flowing from investment analysis
3. Adjust for perceived risk
4. Rank alternatives
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Two forces developed by Colby in 1933
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Centrifugal - push outward from the center to the periphery (crime, congestion, and rent.)
Centripetal - attract towards the center (employment opportunities)
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