Real estate is everywhere. It is where we live, where we play, where we shop, where we work, where we learn.
Real Estate Analysis: Environments and Activities is your guide to the enchanting world of real estate. Real estate is as much process as product, and to understand it is a fascinating journey into the interlocking web of complex human behavior that results in the space that we shape and that ultimately, truly shapes us.
Real estate is a "people business." To understand real estate you must appreciate the people who operate in it. Real Estate Analysis features several conversations in the book with successful real estate professionals who candidly discuss their careers and offer advice to those just entering the real estate world.
Real Estate Analysis is separated in three sections:
To further reinforce and exercise what the reader has learned from Real Estate Analysis, a supporting website was developed. This website, actively maintained, updated, and enriched, features exercises, drag-and-drop scenarios, sample test questions, interactive flash cards, and more.
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Part One - Introduction
Chapter 1 An Introduction to Environments and Activities in Real Estate1.1 Why Real Estate? 1.1.1 Real Estate as Space 1.1.2 Converting Real Estate Rights into Money1.2 Real Estate Environments 1.2.1 Real Estate Markets 1.2.2 Why Real Estate Markets Are Inefficient1.3 Real Estate Activities 1.3.1 The Process of Creating Space: An Activities Model of Real Estate 1.3.2 Real Estate Activities as Real Estate Careers1.4 Organization of This BookSummaryDiscussion QuestionsGlossaryReferences
Chapter 2 Real Estate as an Academic Topic 2.1 Why the University?2.2 The Personality of Academic Disciplines 2.2.1 A Special Class of Academic Discipline 2.2.2 The Applied Discipline of Real Estate2.3 How Disciplines Do Their Descriptive Duty 2.3.1 Paradigms and the Nature of Science 2.3.2 Real Estate as Description 2.3.3 Real Estate with One Paradigm?2.4 Real Estate in the Professions versus within the Academy2.5 Inside the Industry: The Informational InterviewSummaryDiscussion QuestionsGlossaryReferences
Chapter 3 “Gut Feeling” The Human Element 3.1 Human Judgment in Real Estate3.2 Human Problem-Solving Model3.3 Heuristic Behavior and Bias3.4 General Behavioral Findings in Real EstateSummaryDiscussion QuestionsGlossaryReferences
Chapter 4 “Location, Location, Location” The Space Dimension 4.1 The Importance of Location4.2 Spatial Economics 4.2.1 Basic Concepts: Von Thünen Rings 4.2.2 Basic Concepts: Urban Economics4.3 Competitive Advantage Concepts 4.3.1 Skilled and Educated Workforce 4.3.2 Natural Resources 4.3.3 Climate 4.3.4 Transportation 4.3.5 Attitude and Leadership4.4 Economic Base Concept4.4 Urban Growth ModelsSummaryDiscussion QuestionsGlossaryReferences
Chapter 5 The Mathematics of Real Estate Analysis: Time Value of Money, Investment Criteria, and Cash Flow Statements 5.1 Making Choices in Real Estate5.2 Compounding Today’s Dollars into the Future5.3 Discounting Tomorrow’s Dollars to the Present5.4 Calculating the Present Value of a Real Estate Annuity5.5 Installment to Amortize: Calculating the Mortgage Payment 5.5.1 Making Monthly Payments5.6 Future Value of an Annuity and the Sinking Fund5.7 Recapitulation of Time Value of Money Equations5.8 Calculating Net Present Value and IRR5.9 Using NPV and IRR as Investment Decision-Making Aids5.10 Calculating the MIRR5.11 Projecting Investment Cash Flows5.12 Important Ratios in Real Estate Analysis 5.12.1 Value Ratios 5.12.2 Return Measures 5.12.3 Leverage Risk Measures5.12.4 Operating RelationshipsSummaryDiscussion QuestionsGlossaryReferences
Part 2 - Markets and Environment
Chapter 6 Real Estate Markets6.1 The Pricing Function of Real Estate Markets6.2 Real Estate and the Supply and Demand Model of Market Equilibrium6.3 Real Estate and Perfectly Competitive Markets6.4 Real Estate Cycles, Fluctuations, and Production Lags6.5 The Market for Space6.6 The Market for Real Estate as a Capital Asset6.7 An American Dream in Crisis6.8 The Development of a Residential Secondary Mortgage Market6.9 The New Residential Mortgage Business Model6.10 Disintermediation, Deregulation, and the Savings and Loan Crisis6.11 Mortgage Rapture, Housing Rupture6.12 Real Estate Takes a Stroll Down Wall Street6.13 Making Bad Bets on Bad Debts6.14 The Blame Game 6.14.1 Appraisers 6.14.2 Homebuyers and the Poor 6.14.3 Alan Greenspan and the Fed 6.14.4 Loan Originators 6.14.5 Phil Gramm and the U.S. Congress 6.14.6 Bill Clinton 6.14.7 George Bush 6.14.8 Rating Agencies 6.14.9 Federal Regulators 6.14.10 Fannie and Freddie 6.14.11 Wall Street6.15 Lessons Learned if Ill-RememberedSummaryDiscussion QuestionsGlossaryReferences
Chapter 7 Political and Legal Environments 7.1 Regulation of Real Property7.2 Government Powers 7.2.1 Police Powers 7.2.2 Eminent Domain 7.2.3 Taxation 7.2.4 EscheatSummaryDiscussion QuestionsGlossaryReferences
Part 3 - Real Estate Activities
Chapter 8 Entrepreneurial Activity8.1 The Two Operative Attitudes of Real Estate Development8.2 The Process of Real Estate Development8.3 Project Precommitment 8.3.1 Stage 1: Conceive a Development Project 8.3.2 Stage 2: Examine the Feasibility of the Project 8.3.3 Stage 3: Refine the Concept8.4 Project Postcommitment 8.4.1 Stage 4: Design the Project 8.4.2 Stage 5: Construct the Design 8.4.3 Stage 6: Manage the AssetSummaryDiscussion QuestionsGlossaryReferences
Chapter 9 Investor Activity 9.1 The Essence of Investing9.2 Fundamentals 9.2.1 Strategies 9.2.2 Risks 9.2.3 Benefits9.3 Quantitative Analysis: DCF and The Investment Problem9.3.1 Introduction9.3.2 Step 1: BTCF9.3.3 Step 2: Taxable Income9.3.4 Step 3: ATCF9.3.5 Step 4: Before-Tax Equity Reversion9.3.6 Step 5: Capital Gains Tax9.3.7 Step 6: DCF Analysis9.3.8 Step 7: The Decision9.3.9 Practice Problem9.3.10 Conclusion and Caveats9.4 Quantitative Analysis: Ratios9.4.1 Risk9.4.2 Return9.4.3 Ratio Analysis Practice ProblemSummaryInvestment Problem AssignmentsDiscussion QuestionsGlossaryReferences
Chapter 10 Lending Activity 10.1 Mortgage Basics and Activities10.2 Mortgage Concepts and Products 10.2.1 Mortgage Concepts 10.2.2 Product: Fixed Rate or Payment Mortgage 10.2.3 Product: Hybrid and Adjustable Rate or Payment Mortgage10.3 Mortgage Underwriting 10.3.1 Commercial 10.3.2 ResidentialSummaryDiscussion QuestionsGlossaryReferences
Chapter 11 Government Activity 11.1 Government as a Partner11.2 Property Taxation Administration11.3 Real Property Regulations 11.3.1 Comprehensive Plan 11.3.2 Zoning 11.3.3 Building Codes and Subdivision RegulationsSummaryDiscussion QuestionsGlossaryReferences
Chapter 12 Professional Activity 12.1 The Diverse Realm of Real Estate Professionals12.2 Real Estate Appraisers: Arbiters of Value12.3 The Prescriptive Appraisal Process12.3.1 Gathering Relevant Data and Performing Supportive Analyses 12.3.2 Valuing the Subject Property12.4 A Descriptive Understanding of Real Estate Appraisal12.5 The Managers: Warders of Property and Value12.6 The Real Estate Attorney: Master Shipwright12.6.1 Attorney as Technician 12.6.2 Attorney as Negotiator 12.6.3 Attorney as Adviser and Counselor12.7 Brokers: Intermediaries of the Virtual Marketplace12.8 The Developer’s Team: Architects, Engineers, and Contractors12.8.1 Architects 12.8.2 Engineers 12.8.3 Contractors 12.8.4 Contractual Relationships for the Development Team 12.8.5 Subcontractor Concerns 12.8.6 Scheduling ToolsSummaryDiscussion QuestionsGlossaryReferences
Chapter 13 Consuming Activity 13.1 The Space Users13.2 The Household Location Decision 13.2.1 To Own or Not to Own Your Home 13.2.2 Borrowing to Buy Your Home13.3 Business Use and Management of Space 13.3.1 Managing Real Estate to Support Corporate Strategy 13.3.2 The Corporate Location Decision 13.3.3 The Corporate Tenure Decision: Rent or Own 13.3.4 The History and Future of Corporate Space Management13.4 Government Use and Management of SpaceSummaryDiscussion QuestionsGlossaryReferences
Chapter 14 Successor Entrepreneurial Activity14.1 The Other Real Estate Entrepreneurs14.2 Who Owns Our Space? 14.2.1 Publicly Held Property: REITs 14.2.2 How Successor Entrepreneurs Own Property 14.2.3 Institutional Investors14.3 How Successor Entrepreneurs Build Wealth in Real Estate 14.3.1 The Entrepreneurial Ownership Cycle 14.3.2 Case Study: Jackson, Oats, Shaw 14.3.3 The Importance of Relationship Development and Maintenance 14.3.4 Residential Successor Entrepreneurship: Flipping HousesSummaryDiscussion QuestionsGlossaryReferences
Appendix 1 Behavioral Findings in Real Estate: The ResearchAppendix 2 History in a Box of the World over the Last 13,000 YearsAppendix 3 Derivation of the Equation for the Present Value of an AnnuityIndex