590 Lecture 1

1. MBA 590 Real Estate Analysis ! College of Business Alfaisal UNIVERSITY

2. Gale L. Pooley, Ph.D., MAI, MRICS, CCIM, SRA gpooley@alfaisal.edu

21. ! Syllabus ! Class Exams Presentation Rules ! ! ! College of Business Alfaisal UNIVERSITY

22. Textbook ! Real Estate Principles: A Value Approach ! David C. Ling Wayne R. Archer ! College of Business Alfaisal UNIVERSITY

23. afMBA590.blogspot.com ! College of Business Alfaisal UNIVERSITY

24. What is real estate?

27. What is real estate?

28. Largest Component of Wealth

29. Half of Wealth is Real Estate

32. Make better decisions

33. All decisions depend on an estimate of value

34. Price Cost Value

35. 1- Property

36. 1- Property Anything you can own

38. Property

39. Property

40. Property Tangible - Touch

41. Property Tangible - Touch

42. Property Tangible - Touch Intangible - Cannot Touch

43. Property Tangible - Touch Intangible - Cannot Touch

45. Land and its permanent improvements

46. Horizontal ! Vertical

47. Personal Property

48. 2 - Bundle of Rights

49. 2 - Bundle of Rights What I can do with real property

51. Bundle of Rights

57. Bundle of Rights More rights = more value

58. Bundle of Rights More rights = more value

59. Physical Location Legal

60. Is real property tangible or intangible?

61. Is real property tangible or intangible? Both

62. 3 - Industry

63. 3 - Industry developing managing buying/selling evaluating

64. brokerage management appraisal consulting site selection - development construction financing investment government

65. entrepreneurs analysts managers regulators

83. Real Estate in U.S. 23%

84. Financing Older to Younger Generations

85. Users Financing Generations

86. User Market Capital Market Property Market

87. User Market

88. User Market owner occupants

89. User Market owner occupants tenants or renters

90. U.S. Ownership

91. U.S. Ownership homes - 67%

92. U.S. Ownership homes - 67% commercial - 33%

93. Saudi Ownership

94. Saudi Ownership homes - 27%

95. Residential

96. Residential single-family

97. Residential single-family multiple-family

98. Commercial

99. Commercial offices

100. Commercial offices industrial

101. Commercial offices industrial retail

102. Commercial offices industrial retail other

103. Capital Market

104. Capital Market provide money to the real estate market

105. Capital Market

106. Capital Market equity

107. Capital Market equity debt

108. Equity

109. Equity income

110. Equity income rent

111. Equity income rent resale

112. Return

113. Return on your money

114. Return on your money of your money

115. Debt

116. Debt lenders

117. Debt lenders return of principal and interest

118. Equity and Debt

119. Equity and Debt private

120. Equity and Debt private public

121. Private Public Equity Owners Individuals Partnerships Corporations Private equity funds Hedge funds Real Estate Investment Trusts (REITS) Real Estate Companies Debt Lenders Banks, insurance companies, finance companies, private lenders Commercial mortgage backed securities (CMBS)

122. Property Market

123. Property Market investors

124. Property Market investors values

125. Property Market investors values rates

126. Property Market investors values rates feasibility

127. Capitalization Rate

128. Capitalization Rate fundamental

129. Capitalization Rate fundamental measure

130. Capitalization Rate fundamental measure

131. IRV

132. IRV I = Income

133. IRV I = Income R = Rate

134. IRV I = Income R = Rate V = Value

135. IRV

136. IRV I = R x V

137. IRV I = R x V R = I ÷ V

138. IRV I = R x V R = I ÷ V V = I ÷ R

139. IRV

140. IRV If you know two you can solve for third

141. IRV

142. IRV I = 50,000

143. IRV I = 50,000 V = 750,000

144. IRV I = 50,000 V = 750,000 R = ?

145. IRV

146. IRV I = R x V

147. IRV I = R x V R = I ÷ V

148. IRV I = R x V R = I ÷ V V = I ÷ R

149. IRV I = R x V R = I ÷ V V = I ÷ R

151. R = I ÷ V

152. R = I ÷ V R = 50,000 ÷ 750,000

153. R = I ÷ V R = 50,000 ÷ 750,000 R = .0667 or 6.67%

155. I = 500,000

156. I = 500,000 R = .08 or 8%

157. I = 500,000 R = .08 or 8% V = ?

158. I = 500,000 R = .08 or 8% V = ? V = I ÷ R

159. I = 500,000 R = .08 or 8% V = ? V = I ÷ R V = 500,000 ÷ .08

160. I = 500,000 R = .08 or 8% V = ? V = I ÷ R V = 500,000 ÷ .08 V = 6,250,000

161. I = 500,000 R = .08 or 8% V = ? V = I ÷ R V = 500,000 ÷ .08 V = 6,250,000

162. I = 500,000 R = .08 or 8% V = ? V = I ÷ R V = 500,000 ÷ .08 V = 6,250,000

164. V = 5,000,000

165. V = 5,000,000 R = .07 or 7%

166. V = 5,000,000 R = .07 or 7% I = ?

167. V = 5,000,000 R = .07 or 7% I = ? I = V x R

168. V = 5,000,000 R = .07 or 7% I = ? I = V x R I = 5,000,000 x .07

169. V = 5,000,000 R = .07 or 7% I = ? I = V x R I = 5,000,000 x .07 I = 350,000

170. V = 5,000,000 R = .07 or 7% I = ? I = V x R I = 5,000,000 x .07 I = 350,000

171. V = 5,000,000 R = .07 or 7% I = ? I = V x R I = 5,000,000 x .07 I = 350,000

172. Government

173. Government zoning and land use

174. Government zoning and land use fees

175. Government zoning and land use fees building codes

176. Government zoning and land use fees building codes property taxes

177. Government

178. Government licensing

179. Government licensing financing

180. Government licensing financing subsidy

181. Government licensing financing subsidy infrastructure

183. User Market

184. User Market supply and demand determine rental rates which determines property cash flow

185. User Market supply and demand determine rental rates which determines property cash flow I

186. User Market Capital Market supply and demand determine rental rates which determines property cash flow I

187. User Market Capital Market supply and demand determine rental rates which determines property cash flow savers and borrowers determine required rates of return I

188. User Market Capital Market supply and demand determine rental rates which determines property cash flow savers and borrowers determine required rates of return I R

189. User Market Capital Market Property Market supply and demand determine rental rates which determines property cash flow savers and borrowers determine required rates of return I R

190. User Market Capital Market Property Market supply and demand determine rental rates which determines property cash flow savers and borrowers determine required rates of return NOI and required rates of return determine values ! I R

191. User Market Capital Market Property Market supply and demand determine rental rates which determines property cash flow savers and borrowers determine required rates of return NOI and required rates of return determine values ! I V R

192. What affects value?

193. What affects value? all kinds of factors

194. risks and rates

195. risks and rates location risk

196. risks and rates location risk property type risk

197. risks and rates location risk property type risk management risk

198. risks and rates location risk property type risk management risk other risk

199. new construction

200. new construction if cost is less than value

201. supply and demand

202. supply and demand supply is long

203. supply and demand supply is long demand can be short

204. Volatile

205. Volatile good can turn bad and bad can turn good

206. Real Estate Markets differ from all other markets

207. heterogeneous

208. heterogeneous no two properties are exactly the same

209. LVS

210. LVS location-value

211. LVS location-value signature

212. Location

213. Location internal

214. Location internal external

215. immobility

216. immobility cannot change locations

217. Markets

218. Markets illiquid

219. Markets illiquid localized

220. Markets illiquid localized segmented

221. Markets illiquid localized segmented private negotiation

222. Localized

223. Localized the closer the more effect

224. Segmented

225. Segmented different types

226. Segmented different types different prices

227. Negotiations and Costs

228. Negotiations and Costs complexity

229. Negotiations and Costs complexity professionals

230. Negotiations and Costs complexity professionals time

590 Lecture 1

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590 Lecture 1