Condensed Chapter 15 Slides

Condensed Chapter 15 Slides - Chapter 15 Valuation Analysis...

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“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner Chapter 15 Valuation Analysis: Income Discounting, Cap Rates and DCF Analysis
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“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner Major Topics Simple multiplier models of value The income approach to value The derivation of a capitalization rate Overall market rate capitalization Discounted cash flow analysis The net present value decision rule The IRR decision rule
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“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner Introduction “How much is the asset worth?” All methods of valuation reflect that the present value of a property is based on the future returns as measured through cash flows discussed in Chapter 15 They are similar in that they are based upon discounting the future returns to the present using some form of model
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“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner Valuation using Multipliers GRM (Gross Rent Multiplier) = Price / Gross Rent (PGI) Presumption: “Whatever investors are willing to pay for similar property per dollar of gross rent they should be willing to pay for a subject property” GRM should be found from comps with: Similar ages Similar turnover Similar growth projections
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“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner The most applicable appraisal technique which directly considers the motivations of the typical investor by quantifying the benefits of owning real estate Traditional Income Approach to Value NOI (net operating income) R (capitalization rate) Value = ------------------------------------ NOI as used by appraisers is called the stabilized NOI to reflect the longer-term productivity of the property The projected NOI would normally be the NOI for the upcoming 12 months
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Think about cap rates as the inverse of a price
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This note was uploaded on 02/07/2012 for the course FIN 4380 taught by Professor Staff during the Spring '08 term at Texas State.

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Condensed Chapter 15 Slides - Chapter 15 Valuation Analysis...

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