FIN 3332- Exam three review

FIN 3332- Exam three review - FIN 3332 Exam 3 REViEW 2...

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Unformatted text preview: / FIN 3332 Exam 3 REViEW 2 Benjamin Rahman Title in a land contract doesn't pass until all payments are made PITI should be less than 28% gross monthly income (29% for FHA-insured) PITI plus other debt obligations should be less than 36% of gross monthly income (41% for FHAfiinsured) LTV maximum of 70% for commercial property Months supply: (Vacant space + Construction space)/Net absorption per month Larger LTV ratio presents more risk to lender Primary role of FHA is to act as insurance company for private lenders No premiums for VA loans Freddie Mac— Secondary market for conventional loans Ginnie Mae- Provides subsidized loans through FHA loan programs Fannie Mae« Buys mortgages from lenders and serves as a clearinghouse for secondary mortgage market Analysis of industrial sites- Determine supply, forecast demand, estimate absorption rate, compare competitiveness with other projects Shopping center- One or more structures or unified architecture, site that serves a particular area, on-site parking, facilities separated from shopping area, single ownership ' Convenience center: 50,000 square feet Community center= 150,000 square feet Regional center= 400,000 square feet Super-regional center: 1,000,000 square feet Market analysis - Define trade area - Determine size of market - Analyze competition - Estimate percentage of sales Supply curve is almost vertical in short run Property owners and investors in the asset market determine present value of cash flows ‘ If months supply is equal to or less than construction time for new projects, then new project will likely be weli-received by market Equilibrium prices are directly related to changes in demand (inversely related to changes in supply) Real estate asset market prices are determined by: - Opportunity cost of capital - Growth expectations - Risk Indicators of supply side conditions are constructions starts and completions Best indicator for demand side conditions is absorption rate ...
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  • Spring '08
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