This document discusses investment in real estate, including definitions of investment property, common investment property types like apartment buildings and rental houses, and reasons for investing such as appreciation and cash flow. It also covers real estate investment trusts (REITs), the real estate cycle, sources of investment properties, and the present scenario of real estate investing in Saudi Arabia. Case studies of two Saudi real estate investment companies are also mentioned.

1. Investment in Real estate
Chapter 3

2. Objectives
• 1. What is real estate
• 2. Investment in real estate
• 3. Real estate cycle
• 4. REIT
• 5. Present scenario
• 6. Case study

3. Introduction
• There are many different places you can stick
your money other than under your pillow,
including stocks, bonds, savings, mutual funds,
CD, currencies, commodities, and of course,
real estate. There are positive and negative
aspects of each investment option.

4. Definition
• Real estate that generates income or is otherwise
intended for investment purposes rather than as a
primary residence. It is common for investors to own
multiple pieces of real estate, one of which serves as
a primary residence, while the others are used to
generate rental income and profits through price
appreciation.
• The tax implications for investment real estate are
often different than those for residential real estate.

5. Examples
• Common examples of investment properties are
apartment buildings and rental houses, in which the
owners do not live in the residential units, but use
them to generate on-going rental income from
residents. Those who invest in real estate also expect
to generate capital gains as property values increase
over time.

6. Why we invest
• Each person will have their own personal reasons
why they invest. They are typically seeking one or
several of the following:
• Appreciation
• •Cash Flow
• •Leverage
• •Tax Benefits

7. Merits
• Advantages of Investing While Working a Full-
Time Job.
• There are hundreds of ways to make money in
real estate.
• You can fully realize the incredible benefit of
exponential growth.

8. Scenario
• Investing in real estate has become increasingly
popular over the last fifty years and has become a
common investment vehicle. Although the real
estate market has plenty of opportunities for making
big gains, buying and owning real estate is a lot more
complicated than investing in stocks and bonds.

9. Real Estate Investment trust
• A real estate investment trust (REIT) is a company that owns,
and in most cases, operates income-producing real estate.
REITs own many types of commercial real estate, ranging
from office and apartment buildings to warehouses,
hospitals, shopping centres, hotels and even timberlands.
Some REITs also engage in financing real estate.
• Created by the U.S. Congress in 1960
• [1] REITs were designed to provide a real estate investment
structure similar to the structure mutual funds provide for
investment in stocks.
• [2] REITs are strong income vehicles because REITs must pay
out at least 90 percept of their taxable income in the form of
dividends to shareholders.

10. • REITs can be publicly traded on major
exchanges, public but non-listed or private.
• The two main types of REITs are Equity REITs
and Mortgage REITs. In November 2015,
Equity REITs were recognized as a distinct
asset class & in the Global Industry
Classification Standard by S&P Dow Jones
Indices and MSCI.

11. Real estate cycle chart

13. Sources
• Typical sources of investment properties include:
• Market listings (through a Multiple Listing Service or
Commercial Information Exchange)
• Real estate agents and Real estate brokers
• Banks (such as bank real estate owned departments
for REO's and short sales)
• Government entities
• Public auction (foreclosure sales, estate sales, etc.)
• Private sales (transactions for sale by owner For sale
by owner)
• Real estate wholesalers and investors (flipping)

14. Real Estate in SAUDI
• Commonly referred to as Real Estate
Investment Fund, the regulations were
launched in July 2006 by the Saudi Capital
Market Authority, The regulation did not allow
the funds to be traded in the stock market and
force all funds to be structured by a licensed
Investment companies by CMA with a
presence of a real estate developer and some
other key persons.
• Certified Management Accountant - CMA'

15. Present Scenario of KSA
• House prices and property transactions have begun to fall.
In Riyadh, the capital city, apartment prices dropped by 1%
during the year to end-Q3 2015, according to Jones Lang
LaSalle (JLL), and 2% on a quarterly basis in Q3 2015. Villa
prices fell by 5% from a year earlier, and 3% from the
previous quarter.
Likewise in Jeddah, apartment prices fell by 4% y-o-y in Q3
2015, and 5% from the previous quarter, according to JLL.
Villa prices fell by 5% y-o-y in Q3 2015 and 1% from the
previous quarter.
www.jll-mena.com/mena/en-gb/locations

16. Cont.
• A 2000 Real Estate Law allowed legally-resident non-Saudis
to own real estate for their private residence, provided they
get a license from the Ministry of Interior. The law also
allows real estate ownership by foreign investors in order to
conduct their business activities, and for the
accommodation of their employees, with permission from
the Ministry of Interior. To prevent speculation, five years
must elapse before property can be sold.

17. Case study
• Tharaa real estate investment Co.
• http://tharaa.com.sa/#
• Kingdom Holding Company
• http://www.kingdom.com.sa/investments/rea
l-estate
• Read
http://www.investopedia.com/terms/i/invest
mentrealestate.asp#ixzz3zgezIlm9