More opportunity than resources. Incomplete information Rank in term of least expected risks Real estate investment cannot be analyze in isolation. – Appraisal is a comparative process It must be analyze in comparison to alternative investment vehicle – To determine the relative strength and weakness
The Investors • • • Institutional investors – Pension funds – Real Estate Investment Trusts (REIT’s) Foreign participation – Exchange rate – Relative interest rate Individual – Is it really an investment?
Why Invest in Real Estate? • Real estate investment provide returns in two avenues: – Periodic cash flow – Market appreciation/equity build up
Why Invest in Real Estate?
Why Invest in Real Estate? • Price determined by: – Amount and timing of anticipated cash flows – How much will it be received, and when – Degree of confidence with which expectation are held – Investors’ tolerance toward risk – Attractiveness of alternative investment opportunities.
Types of Real Estate
Steps in Investment Decision Process • • • • Estimate the stream of expected benefits Adjust for timing differences among expected streams of benefits flowing from different investments (other alternatives) Adjust for differences in perceived risk associated in each investment type. Rank each investment type to relative desirability of perceive risk return combination the embody.
Value of Expected Benefits Stream • Benefits that is expected to be received in far distant future
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- Winter '16
- dr lizam