Property Rights deals with the rights to ownership of land, objects, and natural resources. An example of a property right would be if there is oil on your land. The details of your housing situation and the contract/lease you signed would provide more insight as to the ownership of the oil. Another example of property rights is who the fixtures inside a renting home belong to. Details such as if the fixture is permanently connected to the household would be looked at to determine the property rights. Another issue is if you live in a condo or town house, and there is a plot of land in the backyard. The property rights will determine if you own any of that land or you share it with the other tenants.
http://www.washingtonpost.com/wp-dyn/articles/A58185-2005Feb27.html
This article contends with a property right dispute in Oregon. Some Oregon land owners feel they should be compensated by the government because their anti-sprawl and land use restrictions have decreased the value of their land. In fact, there is a property right law that says the government should indeed compensate these people. In my opinion I don't think the government should have to compensate people for trying to protect the wildlife of Oregon.
Real Estate much have a legal description for the land that it is on. There are three methods to determine the legal description: metes-and-bounds, rectangular survey, and recorded plats. The legal descriptions fall into two categories, either platted or unplatted. This article provides examples and the methods to come up with the legal descriptions.Examples of a platted development are subdivisions and condos. Unplatted refers to all the land that does not have a legal designation, and it is all about location and dimension. Unplatted descriptions usually take the form of metes-and-bounds.
Tuesday, September 18, 2012
FINC 475 Supply & Demand in a Real Estate Context (Due 9/16)
http://www.investopedia.com/articles/mortages-real-estate/11/factors-affecting-real-estate-market.asp#axzz26qIXeptl
This article lays out the main factors in the supply and demand in the real estate market. One of the key factors is the demographics of the area. The article puts a lot of stock into the demographics as a key factor, which I slightly disagree with. The article claims different demographics prefer different types of real estate. Further evidence for this point is found in this article about the real estate in College Station, TX.. It shows the demographics of the area for potential investors of real estate. Obviously this is pertinent information for investors. Thus, the demographics of a country can dictate the type of demand in real estate. One of the main factors in the supply and demand of real estate is interest rates. Interest rates dictate if a person is going to be able to have the money to purchase the real estate. When interest rates are low, there is a high demand for real estate. When interest rates are high, people do not want to take loans thus the real estate market goes down. The overall economy also dictates the supply and demand of real estate. When the average GDP is higher more people have money to invest. Government policies/subsidies can effect the supply of the real estate market. When a government gives out a subsidy it opens up more real estate and homes for people to buy.
The real estate market efficiency hypothesis contends with the idea that the price and value of real estate reflect all available information. This is a hot topic for debate, as many people believe the seller always has more information than the buyer. This article contends with the debate in the real estate market in Vancouver. The author claims there is data that goes against the efficient market hypothesis. The author claims that some purchases are based on irrational expectations for future returns. He claims there is deviations between the intrinsic and market values of properties, which would cause the efficient market hypothesis to not hold.
This article lays out the main factors in the supply and demand in the real estate market. One of the key factors is the demographics of the area. The article puts a lot of stock into the demographics as a key factor, which I slightly disagree with. The article claims different demographics prefer different types of real estate. Further evidence for this point is found in this article about the real estate in College Station, TX.. It shows the demographics of the area for potential investors of real estate. Obviously this is pertinent information for investors. Thus, the demographics of a country can dictate the type of demand in real estate. One of the main factors in the supply and demand of real estate is interest rates. Interest rates dictate if a person is going to be able to have the money to purchase the real estate. When interest rates are low, there is a high demand for real estate. When interest rates are high, people do not want to take loans thus the real estate market goes down. The overall economy also dictates the supply and demand of real estate. When the average GDP is higher more people have money to invest. Government policies/subsidies can effect the supply of the real estate market. When a government gives out a subsidy it opens up more real estate and homes for people to buy.
The real estate market efficiency hypothesis contends with the idea that the price and value of real estate reflect all available information. This is a hot topic for debate, as many people believe the seller always has more information than the buyer. This article contends with the debate in the real estate market in Vancouver. The author claims there is data that goes against the efficient market hypothesis. The author claims that some purchases are based on irrational expectations for future returns. He claims there is deviations between the intrinsic and market values of properties, which would cause the efficient market hypothesis to not hold.
FINC 475 Real Estate as an Investment (Due 9/16)
Investing in real estate has changed over the years. In the past one could acquire real estate and hold on to the property for many years and receive a solid return on their investment. Presently, investing in real estate is a lot like investing in the stock market. The more return you want the more risk you have to take on. There is no longer a constant growth in the real estate market, you are gambling every time you invest. Just like the stock market, you can hedge your risk by investing in multiple markets. If you put all your money in one real estate market you could win big, or you could lose big. By investing in a variety of real estate markets you don't put all your eggs in one basket. This is similar to investing in a mutual fund in the stock market, some stocks may go down but others will go up. By doing this, you minimize risk.
http://www.theinvestortoday.com/articles/what-are-the-risks-of-real-estate-investing/
This article lays out the different risks in real estate. It also correlates your personality as to how you deal with risk. One risk the article claims in real estate is negative cash flows. The business you invest in on the real estate can go south and not be profitable. This leaves you with a negative investment. Another risk when speculating on real estate is that there will be no appreciation. If an investor plans on flipping a property, and the appreciation on the property is not higher than inflation, the investor will lose money. The article claims you should only buy real estate that you know you can sell for a profit. This statement is a bit ridiculous, there are few times you know you can sell something for a profit before you buy it. There must be some sort of speculation or everyone would do it.
http://www.creonline.com/blog/9-ways-to-eliminate-real-estate-investment-risks/
This article gives you insight on how to eliminate risk when investing in real estate. In my opinion, the article makes investing look easier than it is. It says vague things like "buy the right house". It is often difficult to know what is the "right" house. The part of the article I agree with is the section talking about using the right financing. I find this to be very important in real estate because if you choose the right financing you have a higher chance of making a profit on the investment.
http://articles.economictimes.indiatimes.com/2011-04-08/news/29396722_1_real-estate-bse-realty-index-stock-market
This article explains the similarities in the real estate market and the stock market. It claims that the trends are very similar, and they both are very related to the economy as a whole. It also explains that stocks are much more liquid than real estate, which I agree with. Some real estate investments can take years to get out of, but stocks always have a market to be sold in.
http://www.theinvestortoday.com/articles/what-are-the-risks-of-real-estate-investing/
This article lays out the different risks in real estate. It also correlates your personality as to how you deal with risk. One risk the article claims in real estate is negative cash flows. The business you invest in on the real estate can go south and not be profitable. This leaves you with a negative investment. Another risk when speculating on real estate is that there will be no appreciation. If an investor plans on flipping a property, and the appreciation on the property is not higher than inflation, the investor will lose money. The article claims you should only buy real estate that you know you can sell for a profit. This statement is a bit ridiculous, there are few times you know you can sell something for a profit before you buy it. There must be some sort of speculation or everyone would do it.
http://www.creonline.com/blog/9-ways-to-eliminate-real-estate-investment-risks/
This article gives you insight on how to eliminate risk when investing in real estate. In my opinion, the article makes investing look easier than it is. It says vague things like "buy the right house". It is often difficult to know what is the "right" house. The part of the article I agree with is the section talking about using the right financing. I find this to be very important in real estate because if you choose the right financing you have a higher chance of making a profit on the investment.
http://articles.economictimes.indiatimes.com/2011-04-08/news/29396722_1_real-estate-bse-realty-index-stock-market
This article explains the similarities in the real estate market and the stock market. It claims that the trends are very similar, and they both are very related to the economy as a whole. It also explains that stocks are much more liquid than real estate, which I agree with. Some real estate investments can take years to get out of, but stocks always have a market to be sold in.
FINC 371 Private Restrictions (Due 9/16)
Private Restricts on ownership refer to the rules home owners must follow in certain developments. Common developments that have private restrictions are subdivisions, town homes, or townships. If you live in a town home the private restrictions for that development will dictate how you can use the common area or backyard. I used to live in The Woodlands, a town full of subdivisions, where we had to keep our house looking a certain way and would have to have the landscaping kept up with. We also had to pay monthly fees to the township. These are both examples of private restrictions. They can limit what you can build in your front yard and can even limit how you can design your house on a plot of land.
This article shows the private restrictions for where I used to live, The Woodlands, TX. This document lays out all of the rules home owners must abide by when living in the Woodlands. It has important restrictions on detached add ons such as a garage. It even has restrictions on how to remove a tree. The purpose of all of these private restrictions is to make the community live up to a certain standard so it is a more desirable place to live.
Another example is the Private restrictions in Napa. Like the Woodlands, Napa has their own list of restrictions that their citizens must abide to. These restrictions seem like they are a hassle and limit what you can do on the land YOU bought, but they do make the community nicer which drives up the price of your home when you need to sell.
This article shows the private restrictions for where I used to live, The Woodlands, TX. This document lays out all of the rules home owners must abide by when living in the Woodlands. It has important restrictions on detached add ons such as a garage. It even has restrictions on how to remove a tree. The purpose of all of these private restrictions is to make the community live up to a certain standard so it is a more desirable place to live.
Another example is the Private restrictions in Napa. Like the Woodlands, Napa has their own list of restrictions that their citizens must abide to. These restrictions seem like they are a hassle and limit what you can do on the land YOU bought, but they do make the community nicer which drives up the price of your home when you need to sell.
FINC 371 Public Restrictions (Due 9/16)
Public Restrictions are the government restrictions for ownership of real estate. These restrictions come in four categories: taxation, escheat, eminent domain, and police power. The government has the right to issue property tax on one's real estate. This property tax is usually based on the market value of the real estate. The government also has the right to escheat, which means that the government can claim ownership to real estate in which the owner dies and he/she does not have an heir or a will that dictates who the real estate should go to. The power of eminent domain is used by the government to acquire property from individuals or corporations for public use. The owner of the land must be justly compensated. An example of this would be the government acquiring property to build a highway. Police power gives the government the right to monitor and police private property to protect the public. Examples of this is requiring certain environmental standards on power plants.
http://www.cnn.com/video/#/video/bestoftv/2009/11/20/roberts.eminent.domain.cnn
This article contends with the government power of eminent domain. The plaintiff is the last resident living in his condo that is in consideration of being acquired by the government to open a new arena for the New Jersey Nets. He complains that the arena is not a public use project, and is hoping the courts overrule the decision to give the property to the government. The government counters his complaints by saying that the arena will create 10,000 new jobs.
http://www.nytimes.com/2007/07/29/nyregion/nyregionspecial2/29RDOMAIN.html?ref=eminentdomain
Homeowners in in Long Branch, New Jersey have been in a 12 year battle for their homes. The city of Long Branch, New Jersey is attempting to use eminent domain to acquire their homes to give way to a private developer. The home owners are fighting this because they believe the city is doing this to increase tax revenue. The home owners have a fighting chance as it seems that the government is abusing their power of eminent domain, which is supposed to be used only for public use projects.
http://www.cnn.com/video/#/video/bestoftv/2009/11/20/roberts.eminent.domain.cnn
This article contends with the government power of eminent domain. The plaintiff is the last resident living in his condo that is in consideration of being acquired by the government to open a new arena for the New Jersey Nets. He complains that the arena is not a public use project, and is hoping the courts overrule the decision to give the property to the government. The government counters his complaints by saying that the arena will create 10,000 new jobs.
http://www.nytimes.com/2007/07/29/nyregion/nyregionspecial2/29RDOMAIN.html?ref=eminentdomain
Homeowners in in Long Branch, New Jersey have been in a 12 year battle for their homes. The city of Long Branch, New Jersey is attempting to use eminent domain to acquire their homes to give way to a private developer. The home owners are fighting this because they believe the city is doing this to increase tax revenue. The home owners have a fighting chance as it seems that the government is abusing their power of eminent domain, which is supposed to be used only for public use projects.
FINC 475 DCF CAP RATE (Due 9/16)
For a income generating property, you can find the value simply by dividing the net operating income by the cap rate. The cap rate is found by comparing similar properties. Another option is the discounted cash flow method.
The discounted cash flow method is much more complex than the direct capitalization rate for valuing real estate. This article explains the differences in detail. For one, under the DCF method you must calculate future NOI for each property and the reversion value in the calculation. Under the direct cap method, you only need the NOI and the capitalization rate, found by comparing similar properties. This results in a problem, because NOI's are based on an appraiser's estimates based on market conditions. The appraiser must consider vacancy and collection loss. Under the DCF method, vacancy and collection loss are written off as expenses. For the most part, when the real estate is anticipated to be stable you should use the direct capitalization method, but in a volatile environment the DCF method should be used because it uses NOI's for each future year. Doing a DCF analysis is more extensive and provides more insight in the property. Thus, the DCF method is considered an "art" because the appraiser must take into consideration so many variables that must be based on his/her estimates.
In this article an esteemed professional in the real estate world claims that the discounted cash flow method will replace the direct capitalization method. He claims that the DCF method reveals more quality information and valuation. He also claims that the DCF method is more responsive to change.
This article shows the negatives of the direct capitalization method, claiming that it results in valuations that are too low. It claims that appraisers are having a hard time finding comparable properties to determine the CAP rate because there are so few sales. The article claims that the direct capitalization method does not respond to changes in the market, and it does not account for market cycles in the appraisal process.
The discounted cash flow method is much more complex than the direct capitalization rate for valuing real estate. This article explains the differences in detail. For one, under the DCF method you must calculate future NOI for each property and the reversion value in the calculation. Under the direct cap method, you only need the NOI and the capitalization rate, found by comparing similar properties. This results in a problem, because NOI's are based on an appraiser's estimates based on market conditions. The appraiser must consider vacancy and collection loss. Under the DCF method, vacancy and collection loss are written off as expenses. For the most part, when the real estate is anticipated to be stable you should use the direct capitalization method, but in a volatile environment the DCF method should be used because it uses NOI's for each future year. Doing a DCF analysis is more extensive and provides more insight in the property. Thus, the DCF method is considered an "art" because the appraiser must take into consideration so many variables that must be based on his/her estimates.
In this article an esteemed professional in the real estate world claims that the discounted cash flow method will replace the direct capitalization method. He claims that the DCF method reveals more quality information and valuation. He also claims that the DCF method is more responsive to change.
This article shows the negatives of the direct capitalization method, claiming that it results in valuations that are too low. It claims that appraisers are having a hard time finding comparable properties to determine the CAP rate because there are so few sales. The article claims that the direct capitalization method does not respond to changes in the market, and it does not account for market cycles in the appraisal process.
FINC 371 The Importance of Real Estate (Due 9/16)
Real Estate has been an investment option since the beginning of the United States. As the colonies developed more and more people began speculating on land, especially in the west. When the idea of manifest destiny came about these speculators made huge returns on their investments. Real estate in today's economy still has a huge importance. It is an investment that takes skill in finding the right area and huge risks depending on if the real estate market will go up or down. Corporations with large amounts of capital stand to make the most off of real estate investments because they are able to buy huge plots of land or huge buildings and developments. If everything goes as planned, these corporations stand to make huge returns on their investments. Whereas an individual can speculate on a few properties, a corporation can speculate on thousands.
http://money.cnn.com/2012/08/23/real_estate/new-home-sales/index.html
This article shows trends in the individual real estate market as well as positive news for housing developers. The production of new homes increased around 25% from last year. This is a positive sign for the real estate market and for corporations planning on making housing developments. It also shows that the individual is willing to pay the money for a new house rather than renting or buying an older home.
http://realtytimes.com/rtpages/20120917_normalcy.htm
Related to the first article, this article shows that the real estate market is recovering from it's down years of late. The article has a direct tie to the economy as it discusses the minimization of risk and the renewal of constant growth on real estate. This makes real estate a much more desirable investment. The article is talking about southern California and the mitigation of people "wild speculating". This topic relates directly to the economy, the real estate market recovering is a good sign that the economy might start recovering.
http://money.cnn.com/2012/08/23/real_estate/new-home-sales/index.html
This article shows trends in the individual real estate market as well as positive news for housing developers. The production of new homes increased around 25% from last year. This is a positive sign for the real estate market and for corporations planning on making housing developments. It also shows that the individual is willing to pay the money for a new house rather than renting or buying an older home.
http://realtytimes.com/rtpages/20120917_normalcy.htm
Related to the first article, this article shows that the real estate market is recovering from it's down years of late. The article has a direct tie to the economy as it discusses the minimization of risk and the renewal of constant growth on real estate. This makes real estate a much more desirable investment. The article is talking about southern California and the mitigation of people "wild speculating". This topic relates directly to the economy, the real estate market recovering is a good sign that the economy might start recovering.
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