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Condensed Chapter 11 Slides

Condensed Chapter 11 Slides - Chapter 11 Introduction to...

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“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner Chapter 11 Introduction to Investment Concepts
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“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
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“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
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“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
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“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
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“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:
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