Econ 366 - Chapter 11

Econ 366 - Chapter 11 - Chapter 11 Housing Finance and...

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Chapter 11 Housing Finance and Investment 1. Housing ownership forms and finance 2. Taxation of Housing 3. Is owner occupancy a good investment?
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Defining Terms 1. Dwelling – living place for individual or a household 2. Single-family structure – a building with one dwelling 3. Single family detached structure – single family building not attached to another structure 4. Apartment – a dwelling in a building that contains at least two dwellings 5. Condominium – an apartment or attached structure that is separately owned and is in group of such dwellings where the owners elect a management board that governs the common areas and levies maintenance and repair fees 6. Cooperative – a dwelling that is either an apartment or an attached dwelling in which coop owners own shares in the entire complex usually proportionate to the square feet of the owner’s dwelling 7. Owner-occupied dwelling – dwelling owned by occupant(s) Note : Ownership forms are not related to structure type – single – family structure or apartment may be owner or tenant occupied.
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Ownership Forms A. Industrial/ Commercial : Most private fixed capital in manufacturing, mining and utilities is owned by corporations . Key legal characteristics of corporations is that owners have limited liability – their responsibility for the corporation’s debts extends only to the value of their shares. Limited partnerships are common ownership forms of commercial real estate (offices, shopping centers, rental apartments). In limited partnerships the liability of owners is limited to the value of their ownership certificates B. Residential (Private) Housing The stock of private housing , which is half of the fixed capital in US is almost entirely owned by proprietorships (single-owner) and partnerships (two or more owners) Proprietorships and partnerships have unlimited liability – all their personal assets can be seized to pay their debts
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Housing Finance 1. Corporate Equity : company stock / shares traded in stock exchanges 2. Limited Partnership equity – ownership certificates often traded in stock exchanges 3. Corporate debt : bonds or commercial paper where borrowers agree to pay back the loan on a stipulated schedule. The borrower usually makes two interest payments per year and pay the principal to the holder on maturity.Bonds are typically offered for sale to the public. Bond may contain a call option , giving the right to pay the entire outstanding value of the bond at any given time.(including penalties for prepayment) 4. Mortgages : Real estate proprietorships’ and partnerships’ debt secured by real estate. (similar to corporate debt in that the loan must be paid
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Econ 366 - Chapter 11 - Chapter 11 Housing Finance and...

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