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Real Estate Principles

by: Miss Christophe Schroeder

Real Estate Principles REL 360

Marketplace > Colorado State University > Real Estate > REL 360 > Real Estate Principles
Miss Christophe Schroeder
GPA 3.89

Curtis Sears

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Curtis Sears
Class Notes
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This 20 page Class Notes was uploaded by Miss Christophe Schroeder on Monday September 21, 2015. The Class Notes belongs to REL 360 at Colorado State University taught by Curtis Sears in Fall. Since its upload, it has received 52 views. For similar materials see /class/210163/rel-360-colorado-state-university in Real Estate at Colorado State University.

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Date Created: 09/21/15
Chapter 1 Real Estate Principles v L uu V I The Nature of Real Estate and Real Estate Markets Real estate is property Real estate is property and more Property anything ownedpossessed As establishedprotected by the government or brute strength in the absence thereof Tangible Physical such as cars land and buildings Real property nonmovable and personal property movable Intangible Nonphysical such as financial interests stocks bonds intellectual property copyrights patents trademarks contractual rights purchase contracts and our bundle of rights associated with tangible real property possessionexclusion useenjoyment disposition etc Real estate used three ways Tangible property Improvements to the land infrastructure below Excavation remove and fill add Sanitary sewer utilities storm water detainretain Roads curbs gutters sidewalks Structures M the land Eg buildings vertical improvements Foundations Land I Developed land improvements to the landinfrastructure I Raw land or undeveloped land no improvements Acre 43560 sf209 square z football field wout the end zonesSonnv Lubick Field Real estate used three ways cont d Intangible property the bundle of rights Possessionexclusion Useenjoyment Disposition sell lease gift devise Pledge mortgagedeed of trust Extraction minerals logging farming Control governmentlaws restrictive covenants Many many more Can be bundledunbundled in many ways All in relation to the tangible asset Real estate used three ways cont d Industry and profession Brokerage salelease Development Property management Appraisal Law LandUrban planning Architecture Landscape architecture Government planning regulation amp taxation Finance equitydebt Investmentasset management Engineering Construction Career Focus in textbook Much more in the Internship course Real estate in the economy Personal wealth 50 of the world s private wealth held in RE Production 28 of US GDP Housing alone approx 20 American dream Gov t Revenues 70 of local government revenue property taxes and RE related fees eg building permit Counties and Cities dependent upon RE to survive Greatest regulatory control over RE land use Employment Jobs for more than 9 million Americans direct No other industryasset comes close in terms of impact on every level and aspect of our economyREAL ESTATE RULESl We invest more in real estate than other assets 00 50 100 150 200 250 300 1 Real Estate nongovlcorp Corporate Equities Mortgage Debt all prop types Corporate amp Foreign Bonds US Treasury Securities Municipal Securities Note Real estate nongovernment lncludes developed land It does not include farmland water areas and other rural lands It also does not include real estate owned by non real estate corporations Sources Flow of Funds Accounts of the United States Federal Reserve December 2008 various tables The value of nongov ernment and noncorporate real estate is equal to the value of owneroccupied housing from the Fed Flow of Funds Accounts plus the value of investable commercial real estate from JP Morgan Investment Management Housing as a percentage of total household assets 350 300 250 o 20070 150 100 30 I I I I I I W 00 o 2000 2001 2002 2003 2004 2005 2005 2007 2008 H GovtCorp Bonds StocksMutual Funds l Housingl Source Flow of Funds Accounts of the United States Federal Reserve Various Years Table 8100 Real estate markets sectors and value RE values are a function of the interaction of three marketssectors User Markets competitiondemand for physical space Capital Markets competitiondemand for Government Sector I Local cities and counties have the greatest influence land use regulation construction regulation public infrastructure Federal second greatest influence taxation financing insurance environmental State least in uence on land use however primary influence on certain aspects of real estate eg brokerage insurance appraisal etcie regulatory control over professions User market Participants either providing producers or competing for consumers the useoccupancy of the physical location and space Producers may be buildersdevelopers for sale or investorslandlords for rent Consumers may be owneroccupants or tenants Where pricing sales pricesrental rates is primarily established via supply and demand principles 110 Segmentation of user markets User markets are specific to location and type The markets are highly segmented localized Heterogeneous the product is not of the same kind or nature ie it s unique Compare to homogeneous products and integrated markets gasoline steel milk financial capital commodities that are not differentiated and can be moved or obtained easily from place to place making location relatively unimportant Because real estate is heterogeneous and its markets are highly segmented prices for physically similar space will vary widely from place to place 111 Location location location All about access Literallyingressegressdirection views etc physical attributesconstraints Figuratively to customers employees suppliers services amenities transportation etc demographics Every property has a unique locationvalue signature L V8 No two properties alike every property unique Legal remedy of specific performance is the right to sue for the property itself rather than money damages can t make the buyer wholeso buyer always has the remedy of specific performance 112 Capital markets RE competes for in the capital market with other asset classes such as stocks and bonds Investors select a mix of investments based on expected risk and returns Capital markets include both private and public sources Capital markets include both equity owner and debt lender Equity return from cash flows from salesoperations Debt return from interest payments by borrower 113 Public capital markets Capital invested and real estate owned indirectly Capital pooled with many other investors Small homogeneous units of ownership in entities traded in public exchanges NYSE and markets Characterized by a high degree of liquidity Informationally and transactionally efficient Equity corporate real estate investment companies equity REITs Debtinvestors in M88 and mortgage REITs 114 Private capital markets Direct investment by one or more of investors NoIimited pooling small closely held entities No unitization of investment illiquid Informationaly and transactionaly inefficient Equity individuals private firms etc Debt individuals private firms commercial banks institutional investors eg insurance companies pension funds etc Syndication and joint venture 115 Real Estate Capital Markets Private directly held Public indirectly held lenders companies private lenders 39 Individuals firms Investors in publicly Equ39tyl institutions traded real estate owners companies and equity RElTs Debt Banks insurance Investors in mortgage backed securities and mortgage RElTs 116 Government sector Influencesenables usercapital markets Land use regulations zoning etc and building codes Provision of services and public infrastructure positive Taxes fees and other extractions on both producer and consumer sides of markets burden Income tax laws Federal amp State Every real estate project is a privatepublic joint venture between private developers investors and the government 117 Chapter 1 Summary Real estate real property immovable Real estate used 3 ways tangible intangible industryprofession Real estate rules the economy Real estate value a function of marketSsectors user capital government Real estate is heterogeneous and its markets are highly segmented 118 End of Chapter 1 Next up Ch 2 Legal Foundations to Value Sammy Lubick Field 0 9 Return 120


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