Class notes
GY 462 Full Revision Guide
- Course
- Institution
- Book
Full Revision Guide including all summaries of lecture notes, tutorials, examination questions and relevant readings.
[Show more]
Connected book
Book Title:
Author(s):
- Edition:
- ISBN:
- Edition:
More summaries for
-
Test Bank for Real Estate Finance And Investments 16th Edition William Brueggeman, Jeffrey Fisher Chapter 1-23
3 reviews
By: balzsczigny • 9 months ago
By: Jiajiawennn • 9 months ago
Thank you!
By: larsbrom30 • 1 year ago
By: johannesstrobel • 6 year ago
Seller
Follow
Jiajiawennn
Reviews received
Content preview
Joven Liew Jia Wen201506858
GY462 – Real Estate Finance
Lecture 1 – Real Estate Investment Analysis I
Property Valuation
The value of a property is fundamentally an assessment of the associated risks and
opportunities (Linneman, 2004)
Downside risks
1. Operating cost – utility bills, maintenance fees, management cost, taxes, insurance cost
2. Vacancy – not being able to lease out the property
3. Natural Disaster – Real estate is a physical and tangible asset that is affected by natural
disasters such as floods, earthquakes
4. Leasing – issues with payment from tenants like nonpayment
5. Liquidity – Real estate is an illiquid investment with high transaction cost hence it is difficult
to time disposing of the asset. It is large and indivisible so it takes up a large proportion of a
person’s portfolio (risky). Different from buying one share. Investors probably need to
leverage to buy real estate asset.
Depends on whether the owner is able to pass through the risks/operating cost to tenants.
Usually possible in commercial real estate (Triple net lease)
Opportunities
1. Operating cost – exploit synergies to reduce operating cost and get higher returns from
restructuring a previously derelict building
2. Terminal Value – Resale price, hope to buy low and sell high
3. Rental growth – Most of the value of the building comes from rental growth during the
holding period instead of hoping for a high resale price. If you are able to generate high
rental growth, it increases terminal value
Project Financing
If decided to buy real estate, how to finance the venture
How much to borrow
How to borrow ex. Fixed rate/ adjustable rate loan
Real estate (RE) as Financial Asset
Differences to other financial assets
Indirect RE investments to avoid downsides and take advantage of upsides of financial
positions in RE ex. REITs and mortgage backed securities
International/portfolio diversification
Differences of Direct Real Estate to other Financial Assets
1. Indivisibility and large lot size – affects both price and risk. Investment is usually in millions
for a building hence leverage is intrinsic in real estate. Not very diversified real estate
portfolio so risk is less thinly spread out.
2. Heterogeneity of assets – each real estate has its unique characteristics
3. Slow and expensive transactions – difficult to time selling (risky)
4. Poor liquidity and private trading – Requires leverage, not many comparable properties
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller Jiajiawennn. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $32.89. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
72042 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now