| |
| |
| Preface | |
| |
| |
| Acknowledgments | |
| |
| |
| |
| Value Analysis | |
| |
| |
| |
| Introduction | |
| |
| |
| Real Estate and the Economy | |
| |
| |
| Real Property Characteristics | |
| |
| |
| Topics Covered in This Book | |
| |
| |
| Summary | |
| |
| |
| Glossary | |
| |
| |
| Questions for Review and Discussion | |
| |
| |
| |
| Investment Environment | |
| |
| |
| The Decision-Making Cycle | |
| |
| |
| Market Participants | |
| |
| |
| Determinants of Real Estate Investment Spending | |
| |
| |
| Micro Demand for Real Estate | |
| |
| |
| Summary | |
| |
| |
| Glossary | |
| |
| |
| Questions for Review and Discussion | |
| |
| |
| Problems | |
| |
| |
| |
| Basic Valuation Concepts | |
| |
| |
| Measuring Cash Return on Investment | |
| |
| |
| Analyzing Cash Returns | |
| |
| |
| Measuring Cash Proceeds Due On Sale | |
| |
| |
| Price Appreciation and Efficient Real Estate Markets: A Digression | |
| |
| |
| Present Worth or Discounted Value | |
| |
| |
| Future Property Values | |
| |
| |
| Summary | |
| |
| |
| Glossary | |
| |
| |
| Questions for Review and Discussion | |
| |
| |
| Problems | |
| |
| |
| |
| Risk and Return in Real Estate | |
| |
| |
| Nature of the Problem | |
| |
| |
| Specific Types of Risks | |
| |
| |
| How Risk Affects Individual Properties | |
| |
| |
| How Risky Is Real Estate? | |
| |
| |
| Relationship Between Risk and Return | |
| |
| |
| How Diversification Can Reduce Real Estate Risk | |
| |
| |
| Summary | |
| |
| |
| Glossary | |
| |
| |
| Questions for Review and Discussion | |
| |
| |
| Problems | |
| |
| |
| |
| Federal Taxes Affecting Real Estate | |
| |
| |
| Tax Basics | |
| |
| |
| Acquisition Phase | |
| |
| |
| Administrative/Operations Phase | |
| |
| |
| Summary | |
| |
| |
| Glossary | |
| |
| |
| Questions for Review and Discussion | |
| |
| |
| Problems | |
| |
| |
| |
| Mechanics of Fixed-Rate Mortgage Financing | |
| |
| |
| Loan Terminology and Basic Financial Concepts | |
| |
| |
| Calculating Debt-Service Payments | |
| |
| |
| Compounding or Discounting More Than Once a Year | |
| |
| |
| Outstanding Loan Balance | |
| |
| |
| Interest Calculations | |
| |
| |
| Loan Amortization Schedule | |
| |
| |
| Points and Fees | |
| |
| |
| Borrowing Costs and Mortgage Choice | |
| |
| |
| Summary | |
| |
| |
| Glossary | |
| |
| |
| Questions for Review and Discussion | |
| |
| |
| Problems | |
| |
| |
| |
| Investment Analysis | |
| |
| |
| Why Invest in Real Estate? | |
| |
| |
| Rational Investor Versus Economic-Being Assumption | |
| |
| |
| How Do Different Property Types Stack Up? | |
| |
| |
| How Specific Investments Are Analyzed | |
| |
| |
| Net Present Value Analysis for Douglas Manor Apartments--An Example | |
| |
| |
| Process Used To Determine After-Tax Cash Flow and After-Tax Equity Reversion | |
| |
| |
| Net Present Value | |
| |
| |
| Internal Rate of Return | |
| |
| |
| Negotiation and Rate of Return | |
| |
| |
| A Caution About Being Too Optimistic | |
| |
| |
| A Caution About Relying Too Heavily on Internal Rate of Return Analysis | |
| |
| |
| Summary | |
| |
| |
| Glossary | |
| |
| |
| Questions for Review and Discussion | |
| |
| |
| Problems | |
| |
| |
| |
| Administrative and Property Management Issues | |
| |
| |
| Management Considerations | |
| |
| |
| Management Requirements by Property Type | |
| |
| |
| Property Tax Appeal | |
| |
| |
| Hazard Insurance | |
| |
| |
| Summary | |
| |
| |
| Glossary | |
| |
| |
| Questions for Review and Discussion | |
| |
| |
| Problems | |
| |
| |
| |
| Disposition or Alienation Decisions | |
| |
| |
| A Look at Ordinary Disposition Decisions | |
| |
| |
| Other Disinvestment Strategies | |
| |
| |
| Dealing with Distressed Properties | |
| |
| |
| Summary | |
| |
| |
| Glossary | |
| |
| |
| Questions for Review and Discussion | |
| |
| |
| Problems | |
| |
| |
| |
| Appraisal | |
| |
| |
| |
| Overview of the Appraisal Process | |
| |
| |
| The Need for Market Value Estimates | |
| |
| |
| The Nature of Value | |
| |
| |
| The Appraisal Process | |
| |
| |
| Making a Survey and Plan | |
| |
| |
| Principles of Appraising | |
| |
| |
| Organizing and Performing an Appraisal of a Regional Shopping Center--An Example | |
| |
| |
| Summary | |
| |
| |
| Glossary | |
| |
| |
| Questions for Review and Discussion | |
| |
| |
| Problems | |
| |
| |
| |
| Income-Property Analysis and Appraisal | |
| |
| |
| How Income Properties Are Valued | |
| |
| |
| Relationship Between Discount Rates and Capitalization Rates | |
| |
| |
| Deriving the Capitalization Rate | |
| |
| |
| Limitations of Direct Capitalization | |
| |
| |
| Gross Income Multiplier Technique | |
| |
| |
| Limitations of the GIM Technique | |
| |
| |
| Summary | |
| |
| |
| Glossary | |
| |
| |
| Questions for Review and Discussion | |
| |
| |
| Problems | |
| |
| |
| |
| Appraising for Single-Family Properties | |
| |
| |
| Direct Sales-Comparison Approach | |
| |
| |
| Cost Approach to Value | |
| |
| |
| Reconciliation | |
| |
| |
| Summary | |
| |
| |
| Glossary | |
| |
| |
| Questions for Review and Discussion | |
| |
| |
| Problems | |
| |
| |
| |
| Advanced Appraisal Topics | |
| |
| |
| The Concept of Highest-and-Best Use | |
| |
| |
| Valuing Leasehold Interests | |
| |
| |
| Summary | |
| |
| |
| Glossary | |
| |
| |
| Questions for Review and Discussion | |
| |
| |
| Problems | |
| |
| |
| |
| Property Development | |
| |
| |
| |
| Property Development Process | |
| |
| |
| History and Economics of Property Development | |
| |
| |
| Stages of the Development Process | |
| |
| |
| Role of the Lender | |
| |
| |
| Development Policy Issues | |
| |
| |
| Summary | |
| |
| |
| Glossary | |
| |
| |
| Questions for Review and Discussion | |
| |
| |
| |
| Analysis for Property Development | |
| |
| |
| Site Selection and Analysis | |
| |
| |
| Improvement Analysis | |
| |
| |
| Analysis for Property Development | |
| |
| |
| Risk Analysis | |
| |
| |
| Summary | |
| |
| |
| Glossary | |
| |
| |
| Questions for Review and Discussion | |
| |
| |
| Problems | |
| |
| |
| |
| Land Development | |
| |
| |
| The Land Development Process | |
| |
| |
| Site Analysis | |
| |
| |
| Locational Obsolescence | |
| |
| |
| A Site-Evaluation Checklist | |
| |
| |
| What Is Plottage Value? | |
| |
| |
| Land Development Financing | |
| |
| |
| Summary | |
| |
| |
| Glossary | |
| |
| |
| Questions for Review and Discussion | |
| |
| |
| Problems | |
| |
| |
| |
| Advanced Property Development Issues | |
| |
| |
| Intensity-of-Use--The Case of an Office Building | |
| |
| |
| The Building-Envelope Calculation | |
| |
| |
| Analysis for Redevelopment or Modernization | |
| |
| |
| Redevelopment Versus Renovation | |
| |
| |
| Inherent Risks in Renovating a Property | |
| |
| |
| Summary | |
| |
| |
| Glossary | |
| |
| |
| Questions for Review and Discussion | |
| |
| |
| Problems | |
| |
| |
| |
| Spatial Economics | |
| |
| |
| |
| Spatial Economics and Urban Area Structure | |
| |
| |
| Urban Area Structure | |
| |
| |
| Why Do Urban Areas Grow? | |
| |
| |
| Rent Theory and Urban Structure | |
| |
| |
| Example: The Trade-Off Between Land Rent and Distance to the City | |
| |
| |
| Summary | |
| |
| |
| Glossary | |
| |
| |
| Questions for Review and Discussion | |
| |
| |
| Problems | |
| |
| |
| |
| More About Urban Area Structure and Real Estate Markets | |
| |
| |
| Types of Real Estate Markets | |
| |
| |
| Market Characteristics | |
| |
| |
| Factors of Supply and Demand | |
| |
| |
| Real Estate Market Functions | |
| |
| |
| Real Estate Market Operations | |
| |
| |
| Local Real Estate Market Indicators | |
| |
| |
| Summary | |
| |
| |
| Glossary | |
| |
| |
| Questions for Review and Discussion | |
| |
| |
| |
| Real Estate Market and Feasibility Analysis | |
| |
| |
| The Study Framework | |
| |
| |
| Estimating Potential Market Demand for Retail Uses--An Example | |
| |
| |
| Estimating Market Demand for Office Uses--A More Difficult Example | |
| |
| |
| Projecting Population for Milwaukee County--A Third Example | |
| |
| |
| Feasibility Analysis | |
| |
| |
| Summary | |
| |
| |
| Glossary | |
| |
| |
| Questions for Review and Discussion | |
| |
| |
| Problems | |
| |
| |
| |
| Real Estate Finance | |
| |
| |
| |
| Debt and Equity Financing of Real Estate | |
| |
| |
| Equity Financing | |
| |
| |
| Debt Financing | |
| |
| |
| Land-Contract Financing | |
| |
| |
| Financial Leverage | |
| |
| |
| Measuring the Impact of Financial Leverage on the Internal Rate of Return | |
| |
| |
| Summary | |
| |
| |
| Glossary | |
| |
| |
| Questions for Review and Discussion | |
| |
| |
| Problems | |
| |
| |
| |
| Real Estate Investment Trusts | |
| |
| |
| How REITs Operate | |
| |
| |
| REIT Dividend Income | |
| |
| |
| How REITs are Valued | |
| |
| |
| Understanding Umbrella Partnership REITs | |
| |
| |
| Down-REIT Structures | |
| |
| |
| Paper Shares and Paper Clips | |
| |
| |
| Wholly-Owned Subsidiaries | |
| |
| |
| Factors that Influence REIT Value | |
| |
| |
| Real Estate Operating Companies | |
| |
| |
| Summary | |
| |
| |
| Glossary | |
| |
| |
| Questions for Review and Discussion | |
| |
| |
| Problems | |
| |
| |
| |
| Financing Homeownership | |
| |
| |
| Determining Housing Affordability | |
| |
| |
| Federal Tax Laws and Homeownership | |
| |
| |
| Rent or Buy? | |
| |
| |
| How Houses Are Financed | |
| |
| |
| Housing Affordability and Loan Repayment Plans | |
| |
| |
| Summary | |
| |
| |
| Glossary | |
| |
| |
| Questions for Review and Discussion | |
| |
| |
| Problems | |
| |
| |
| |
| Mortgage Underwriting | |
| |
| |
| Applying for a Loan | |
| |
| |
| Loan Documents | |
| |
| |
| The Debt-Financing Process | |
| |
| |
| Provisions of Mortgages and Trust Deeds | |
| |
| |
| Lender Risks | |
| |
| |
| Lender Procedures and Commitments | |
| |
| |
| Federal Laws Affecting Lending | |
| |
| |
| Summary | |
| |
| |
| Glossary | |
| |
| |
| Questions for Review and Discussion | |
| |
| |
| Problems | |
| |
| |
| |
| Mortgage Securitization | |
| |
| |
| Secondary Lenders | |
| |
| |
| Mortgage-Backed Securities | |
| |
| |
| Collateralized Mortgage Obligations | |
| |
| |
| Securitization of Commercial Mortgages | |
| |
| |
| Summary | |
| |
| |
| Glossary | |
| |
| |
| Questions for Review and Discussion | |
| |
| |
| Problems | |
| |
| |
| |
| Law and Brokerage | |
| |
| |
| |
| Property Descriptions and Public Records | |
| |
| |
| What Is Real Property? | |
| |
| |
| Legal Descriptions of Real Property | |
| |
| |
| Public Records | |
| |
| |
| Summary | |
| |
| |
| Glossary | |
| |
| |
| Questions for Review and Discussion | |
| |
| |
| Problems | |
| |
| |
| |
| Real Property Rights and Interests | |
| |
| |
| Freehold Ownership Interests | |
| |
| |
| Owning Real Estate by Business Organizations | |
| |
| |
| Encumbrances to Ownership | |
| |
| |
| Summary | |
| |
| |
| Glossary | |
| |
| |
| Questions for Review and Discussion | |
| |
| |
| Problems | |
| |
| |
| |
| Leasing and Lease Analysis | |
| |
| |
| Creating a Valid Lease | |
| |
| |
| Typical Lease Clauses | |
| |
| |
| Termination of Leases | |
| |
| |
| Tenant Unions | |
| |
| |
| Summary | |
| |
| |
| Glossary | |
| |
| |
| Questions for Review and Discussion | |
| |
| |
| Problems | |
| |
| |
| |
| Governmental Limitations to Ownership | |
| |
| |
| Police Power | |
| |
| |
| Eminent Domain | |
| |
| |
| Taxation and Special Assessments | |
| |
| |
| Summary | |
| |
| |
| Glossary | |
| |
| |
| Questions for Review and Discussion | |
| |
| |
| Problems | |
| |
| |
| |
| The Investor-Broker Relationship | |
| |
| |
| The Law of Agency | |
| |
| |
| Listing Agreements | |
| |
| |
| Critical Issues in the Listing Arrangement | |
| |
| |
| Selecting a Broker | |
| |
| |
| Summary | |
| |
| |
| Glossary | |
| |
| |
| Questions for Review and Discussion | |
| |
| |
| Problems | |
| |
| |
| |
| Brokerage Operations and Practices | |
| |
| |
| The Brokerage Function | |
| |
| |
| The Listing Process | |
| |
| |
| Selling the Listed Property | |
| |
| |
| Advertising Real Estate | |
| |
| |
| Brokerage Trends | |
| |
| |
| Summary | |
| |
| |
| Glossary | |
| |
| |
| Questions for Review and Discussion | |
| |
| |
| |
| Contracts for the Purchase and Sale of Real Estate | |
| |
| |
| Essentials of a Valid Real Estate Contract | |
| |
| |
| Types of Sales Contracts | |
| |
| |
| Components of an Earnest Money Contract | |
| |
| |
| Remedies for Nonperformance | |
| |
| |
| Escrow Arrangements | |
| |
| |
| Summary | |
| |
| |
| Glossary | |
| |
| |
| Questions for Review and Discussion | |
| |
| |
| Problems | |
| |
| |
| |
| Title Assurances and Title Transfer | |
| |
| |
| Methods of Transferring Title | |
| |
| |
| Title Evidence | |
| |
| |
| Deeds | |
| |
| |
| Essentials of a Valid Deed | |
| |
| |
| Summary | |
| |
| |
| Glossary | |
| |
| |
| Questions for Review and Discussion | |
| |
| |
| Problems | |
| |
| |
| |
| Title Closing | |
| |
| |
| Preliminaries for Closing | |
| |
| |
| Elements of Closing Costs | |
| |
| |
| Closing-Statement Entries and Prorations | |
| |
| |
| Escrow Closing | |
| |
| |
| Title Conveyance | |
| |
| |
| Real Estate Settlement Procedures Act (RESPA) | |
| |
| |
| Summary | |
| |
| |
| Glossary | |
| |
| |
| Questions for Review and Discussion | |
| |
| |
| Problems | |
| |
| |
| |
| Time Value of Money | |
| |
| |
| Compounding or Future Value | |
| |
| |
| Discounting or Present Value | |
| |
| |
| Time Value of Money Factors | |
| |
| |
| Principal Recovery Factor | |
| |
| |
| Time Value of Money Tables | |
| |
| |
| Index | |