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MGT 374
Real Estate Analysis
College
of Business
AlfaisalUNIVERSITY
Gale L. Pooley,
Ph.D., MAI, FRICS, CCIM, SRA
gpooley@alfaisal.edu
Syllabus
Class
Exams
Presentation
Rules
College
of Business
AlfaisalUNIVERSITY
Textbook
Real Estate
Principles:AValue
Approach
David C. Ling
Wayne R.Archer
College
of Business
AlfaisalUNIVERSITY
afMGT374.blogspot.com
College
of Business
AlfaisalUNIVERSITY
What is
real estate?
What is
real estate?
Largest
Component of
Wealth
Half of
Wealth is
Real Estate
Make better
decisions
All decisions
depend on an
estimate of value
Price
Cost
Value
1- Property
Anything you can
own
Property
Tangible - Touch
Intangible - Cannot Touch
Land and its
permanent
improvements
Horizontal
Vertical
Personal
Property
2 - Bundle of Rights
What I can do
with real
property
Bundle of Rights
More rights = more value
Physical
Location
Legal
Is real property
tangible or
intangible?
Both
3 - Industry
developing
managing
buying/selling
evaluating
brokerage
management
appraisal consulting
site selection - development
construction
financing
investment
government
entrepreneurs
analysts
managers
regulators
Real Estate in U.S.
23%
Financing
Real Estate
Financing
Older toYounger
Generations
Users
Financing
Generations
Three Markets
User Market
Capital Market
Property Market
User Market
owner occupants
tenants or renters
U.S. Ownership
homes - 67%
commercial - 33%
Saudi Ownership
homes - 27%
Residential
single-family
multiple-family
Commercial
offices
industrial
retail
other
Capital Market
provide money to
the real estate
market
Capital Market
equity
debt
Equity
income
rent
resale
Return
on your money
of your money
Debt
lenders
return of principal
and interest
Equity and Debt
private
public
Private Public
Equity
Owners
Individuals
Partnerships
Corporations
Private equity funds
Hedge funds
Real Estate Investment...
Property Market
investors
values
rates
feasibility
Capitalization Rate
fundamental
measure
IRV
I = Income
R = Rate
V =Value
IRV
I = R xV
R = I ÷V
V = I ÷ R
IRV
If you know two
you can solve for
third
IRV
I = 50,000
V = 750,000
R = ?
IRV
I = R xV
R = I ÷V
V = I ÷ R
R = I ÷V
R = 50,000 ÷ 750,000
R = .0667 or 6.67%
I = 500,000
R = .08 or 8%
V = ?
V = I ÷ R
V = 500,000 ÷ .08
V = 6,250,000
V = 5,000,000
R = .07 or 7%
I = ?
I =V x R
I = 5,000,000 x .07
I = 350,000
Government
zoning and land use
fees
building codes
property taxes
Government
licensing
financing
subsidy
infrastructure
User
Market
Capital
Market
Property
Market
supply and
demand
determine
rental
rates
which
determines
property cash
flow
sav...
What affects value?
all kinds of factors
risks and rates
location risk
property type risk
management risk
other risk
new construction
if cost is less than
value
supply and demand
supply is long
demand can be
short
Volatile
good can turn bad
and bad can turn
good
Real Estate
Markets differ
from all other
markets
heterogeneous
no two properties
are exactly the
same
LVS
location-value
signature
Location
internal
external
immobility
cannot change
locations
Markets
illiquid
localized
segmented
private negotiation
Localized
the closer the
more effect
Segmented
different types
different prices
Negotiations and
Costs
complexity
professionals
time
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Lecture 1

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  1. 1. MGT 374 Real Estate Analysis College of Business AlfaisalUNIVERSITY
  2. 2. Gale L. Pooley, Ph.D., MAI, FRICS, CCIM, SRA gpooley@alfaisal.edu
  3. 3. Syllabus Class Exams Presentation Rules College of Business AlfaisalUNIVERSITY
  4. 4. Textbook Real Estate Principles:AValue Approach David C. Ling Wayne R.Archer College of Business AlfaisalUNIVERSITY
  5. 5. afMGT374.blogspot.com College of Business AlfaisalUNIVERSITY
  6. 6. What is real estate?
  7. 7. What is real estate?
  8. 8. Largest Component of Wealth
  9. 9. Half of Wealth is Real Estate
  10. 10. Make better decisions
  11. 11. All decisions depend on an estimate of value
  12. 12. Price Cost Value
  13. 13. 1- Property Anything you can own
  14. 14. Property Tangible - Touch Intangible - Cannot Touch
  15. 15. Land and its permanent improvements
  16. 16. Horizontal Vertical
  17. 17. Personal Property
  18. 18. 2 - Bundle of Rights What I can do with real property
  19. 19. Bundle of Rights More rights = more value
  20. 20. Physical Location Legal
  21. 21. Is real property tangible or intangible? Both
  22. 22. 3 - Industry developing managing buying/selling evaluating
  23. 23. brokerage management appraisal consulting site selection - development construction financing investment government
  24. 24. entrepreneurs analysts managers regulators
  25. 25. Real Estate in U.S. 23%
  26. 26. Financing Real Estate
  27. 27. Financing Older toYounger Generations
  28. 28. Users Financing Generations
  29. 29. Three Markets User Market Capital Market Property Market
  30. 30. User Market owner occupants tenants or renters
  31. 31. U.S. Ownership homes - 67% commercial - 33%
  32. 32. Saudi Ownership homes - 27%
  33. 33. Residential single-family multiple-family
  34. 34. Commercial offices industrial retail other
  35. 35. Capital Market provide money to the real estate market
  36. 36. Capital Market equity debt
  37. 37. Equity income rent resale
  38. 38. Return on your money of your money
  39. 39. Debt lenders return of principal and interest
  40. 40. Equity and Debt private public
  41. 41. Private Public Equity Owners Individuals Partnerships Corporations Private equity funds Hedge funds Real Estate Investment Trusts (REITS) Real Estate Companies Debt Lenders Banks, insurance companies, finance companies, private lenders Commercial mortgage backed securities (CMBS)
  42. 42. Property Market investors values rates feasibility
  43. 43. Capitalization Rate fundamental measure
  44. 44. IRV I = Income R = Rate V =Value
  45. 45. IRV I = R xV R = I ÷V V = I ÷ R
  46. 46. IRV If you know two you can solve for third
  47. 47. IRV I = 50,000 V = 750,000 R = ?
  48. 48. IRV I = R xV R = I ÷V V = I ÷ R
  49. 49. R = I ÷V R = 50,000 ÷ 750,000 R = .0667 or 6.67%
  50. 50. I = 500,000 R = .08 or 8% V = ? V = I ÷ R V = 500,000 ÷ .08 V = 6,250,000
  51. 51. V = 5,000,000 R = .07 or 7% I = ? I =V x R I = 5,000,000 x .07 I = 350,000
  52. 52. Government zoning and land use fees building codes property taxes
  53. 53. Government licensing financing subsidy infrastructure
  54. 54. User Market Capital Market Property Market supply and demand determine rental rates which determines property cash flow savers and borrowers determine required rates of return NOI and required rates of return determine values I RV
  55. 55. What affects value? all kinds of factors
  56. 56. risks and rates location risk property type risk management risk other risk
  57. 57. new construction if cost is less than value
  58. 58. supply and demand supply is long demand can be short
  59. 59. Volatile good can turn bad and bad can turn good
  60. 60. Real Estate Markets differ from all other markets
  61. 61. heterogeneous no two properties are exactly the same
  62. 62. LVS location-value signature
  63. 63. Location internal external
  64. 64. immobility cannot change locations
  65. 65. Markets illiquid localized segmented private negotiation
  66. 66. Localized the closer the more effect
  67. 67. Segmented different types different prices
  68. 68. Negotiations and Costs complexity professionals time

Lecture 1

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