Wednesday, October 31, 2012
FINC 371 Real Estate Financing
The two most common loans in real estate are the fixed rate mortgage and the adjustable-rate mortgage. A hybrid loan is a combination of both. There are also reverse mortgage loans, and loans that use a different term for the amortization as the loan term. Often time people want to have the term of the loan coincide with the time they want to hold the property, but this is not always the case. For mortgages, a common example of a loan term is around 30 years. There are many sources of capital for real estate. This can come in the form of equity or debt. For example, a REIT that is public will sell shares of it's stock to get capital for real estate. There are many ways to "Creatively" finance your real estate firm. I believe that a firm should be highly levered, meaning it should favor debt over equity, because interest is tax-deductible. Firms can also offer subsidized housing to lesser off families to receive tax credits.
FINC 371 Overview of Real Estate Finance
Real estate finance is essential in real estate investments because many times one needs a loan to acquire a property. Major employers in this arena include commercial banks, and regular banks, who give out loans to people who choose to use debt financing to acquire a property. Another employer in real estate finance is appraisal firms. Jobs in real estate finance include brokerage, real estate appraisal, mortgage banking, and title insurance. Some trade organizations in real estate are the American Land Title Association, the Building Owners and Management Association, and Mortgage Bankers Association of America. Real Estate financial markets have been on an increase since the housing downturn in the 2000's.
http://finance.yahoo.com/news/everybody-says-downsize-everybody-may-213800235.html
This article contends with the idea that downsizing to create a cash inflow can be the wrong idea. It claims that selling your house to beef up retirement accounts can be a bad decision because of the state of the market. It also says that your property can gain significantly in value, thus you will be losing money.
FINC 371 Overview of a Real Estate Appraisal
An appraisal is a document that approximates the value of something. In this case, that something would be a real estate property. Appraisals take into account many things, such as the value of the land and the expected revenue that comes from the property. Appraisals aim to get as close as possible to the marker value of the property. Appraisals are perceived as an opinion. You may agree or disagree with an appraisal. A bad appraisal would be one that you don't agree with the value that the appraiser assigns to the value. There are many types of appraisals. Sometimes they are done to evaluate an estate for a will. Sometimes appraisals are used by banks when a house is foreclosed on. The government also uses appraisals for tax purposes. With the influx of information available to the public, I believe appraisals will decline, as people will attempt to do their own appraisal.
The appraisal is also very important for your loan. As this article shows, an appraisal that is too low can mess up your valuation which can cause you to not get your mortgage loan. This is due to the fact that some banks use a loan to value calculation when deciding to give a mortgage or not. I believe in cases like this appraisers should lean to a higher value than lower when making a tough decision. This is a similar article which contends with appraisals that are on the low side. In this article it is the realtors who are complaining about the appraisals. Low appraisals are bad for realtors in that it effects their customers getting loans and it effects their sales price.
The appraisal is also very important for your loan. As this article shows, an appraisal that is too low can mess up your valuation which can cause you to not get your mortgage loan. This is due to the fact that some banks use a loan to value calculation when deciding to give a mortgage or not. I believe in cases like this appraisers should lean to a higher value than lower when making a tough decision. This is a similar article which contends with appraisals that are on the low side. In this article it is the realtors who are complaining about the appraisals. Low appraisals are bad for realtors in that it effects their customers getting loans and it effects their sales price.
FINC 371 Overview of a real estate appraiser
Being a real estate appraiser sounds like an enjoyable job where you get to use your analytical and social skills. The first step in becoming an appraiser is getting a trainee license. The next few stages you don't make much money, but it is wise to find a job where you will have someone to show you the ropes and help you network. Last, you must get a real estate license, and you will be ready to appraise on your own after you become a certified appraiser. Right now there is high competition for real estate appraisers, the demand is not quite as high as the supply.
This article explains the pay, and the day to day activities of a real estate appraiser. On average, they make around 50K a year. The main day to day activity of an appraiser is appraising. Which means they go out to properties and provide estimates for clients. These can be used for a variety of reasons
One example of a major real estate appraisal firm is The Scott Appraisal Company. This specific company works in central California. They appraise any real estate from industrial to residential. An interesting fact that I saw on the website was their court experience. This leads me to believe that sometimes their appraisals are so serious they are used in a court of law.
This article explains the pay, and the day to day activities of a real estate appraiser. On average, they make around 50K a year. The main day to day activity of an appraiser is appraising. Which means they go out to properties and provide estimates for clients. These can be used for a variety of reasons
One example of a major real estate appraisal firm is The Scott Appraisal Company. This specific company works in central California. They appraise any real estate from industrial to residential. An interesting fact that I saw on the website was their court experience. This leads me to believe that sometimes their appraisals are so serious they are used in a court of law.
Tuesday, September 18, 2012
FINC 371 Property Rights and Legal Descriptions (Due 9/16)
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.
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.
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.
Subscribe to:
Posts (Atom)