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

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