11-14quiz - Chapter 11 Introduction to Investment Concepts...

Info iconThis preview shows pages 1–11. Sign up to view the full content.

View Full Document Right Arrow Icon
“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner Chapter 11 Introduction to Investment Concepts
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner Major Topics Investor Objectives Sources of real estate returns Introduction to Cash Flow Analysis What we mean by direct and indirect real estate investment Returns on labor versus returns on investments Sources of real estate risk Measuring real estate risk Investment alternatives within the real estate asset class Creative advantages of partnerships and investment structuring
Background image of page 2
“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner Introduction: What do Investors Want? Investors seek current or future income or sometimes both Future income might be used for personal consumption at a later date or for future generations Aggressiveness of investor depends on risk preferences
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner Sources of Real Estate Returns Cash Flow - Comes from the collected rents less the operating expenses and debt service - Usually received monthly Tax Shelter or Postponement - Deductible non-cash items include depreciation, amortization of points paid for financing and possibly tax credits for specialized government programs
Background image of page 4
“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner Sources of Real Estate Returns (Contd.) Equity Buildup from Mortgage Repayment - Can occur from mortgage principal repayment Equity Gains from Price Appreciation Sources of appreciation: - Inflation - “Real” price changes
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner Timing of Returns From a timing perspective, we can take the four types of returns listed above and reduce these to only two: Cash Flow (after tax) The before tax cash flow plus or minus tax savings or taxes due can be treated as one final source of returns during the operational stage of ownership Residual Cash Flow (after tax) The appreciation and equity buildup from mortgage repayment both result in before tax proceeds at the time of sale
Background image of page 6
“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner Introduction to Cash Flow Analysis Gross Rent or Potential Gross Income Effective Gross Income Operating Expenses Net Operating Income or NOI Debt Service
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner Important Terms (Contd.) Gross Rent Less Vacancy = Effective Gross Income Less Operating Expenses = Net Operating Income Less Debt Service = Cash Flow (before tax)
Background image of page 8
“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner Current Yield and Total Return Current Period Return Periodic Returns IRR (Internal rate of Return)
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner
Background image of page 10
Image of page 11
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 81

11-14quiz - Chapter 11 Introduction to Investment Concepts...

This preview shows document pages 1 - 11. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online