b-h property legisation lecture 3
TRANSCRIPT
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The importance of follow
B-H property legislation
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The upside of following legislatio
You get a guideline
Will seem like a serious actor in the publics eye
Lesser chance for lawsuites
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Ex.
Evulation for new loans
Not giving out required/statutory information
The dees was not registered
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Real estate finance a
investments
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Real estate finance includes the study o
institutions, markets, and instruments usetransfer money and credit for the purpodeveloping or acquiring real property
Real Estate Finance by Clauretie and Sirmans
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The financial market
Capital Market
Long term securities
More than 1 year maturities
Most real estate financing takesplace in the capital market
Mortgages
Money market
Short term securities
Maturities of 1 year
In real estate:
Short term acquisi
Development loa
Construction loan
Refinanced with lowhen the project
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Real Estate capital market
Dept Equity
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Real Estate capital market
Dept
Bank lending
Municipial lending
Loans from family or friends
Equity
Deposits/Cash
Familie or friends
Grants
In additions when startreal estate agency
Individuals or entrep
Employee ownershi
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20% of something
is more than
100% of nothing
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Practical considerations in the udept to finance real estate
Interest rates
Tax regulations
Can operating losses from real estate be used to offset other incorate.
Can interest be used reduce taxes.
Risk of property and bankrupcy
If operating cash flow from the proporty fails to cover the dept seforeclosure
Acces to equity
How mutch quity Vs. dept
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Indirect Finance- Banks
- Life insurance companies
- Investments companies- Pension funds
Surplus income units- Individuals- Businesses
- Goverments
D
Direct FinanceBrokers
Mortgage bankers
SecondaryMortgage Market
Flow of funds in the savings-Investment cycle
$
$$
SavingsFunds
SecuritiesMortgages
Securities notes etDeposits etc.
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Risk and return
Establish goal
Identify threaths and possibilities
Internal threaths
External threaths
Analyse threaths and possibilities
Best scenario Normal scenario Worst scenario (more if necessary)
Weight the different scenarios with %
Evaluate risk
Are you willing to take the risk. Potensial benefits Vs. Potensial loss
Reduce risk and monitor
Decision
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The financial crises
Started in the US i 2007/2008
Rise of subprime lending
Rise of interest rates
Subprime mortgage was misheld
Foreclosure
People stop buying
Residence prices fall
Expectation
Harder to get loans/increased quite demand
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Where to get funds and alternatfinancing
Bank loans
You need an equity Norway 15%, US 10% in most bank
Good creditscore
Equity
The financial crisis, recession and the pullbacks in the credit market hthe private equity funds in the real estate market over the past severa
Second loan
From bank or other credit institutions.
Seller finance
You make mortgage payments directly to the person you bought the
Lease to buy
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Advanced real estate
principles
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Market research and pricing
Whitch market segment are we looking at?
Commercial
Retail
Service
Etc.
Residence
Renting
Buying
Size and place.
Who are our competitors, marketposition and their pricing
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Pricing to the customer
What price do we charge for our services?
What can we do to make our price seem a little more attrac
Are the prices public, or only given to those who ask?
It is importent to find out how much your target market will paservice.
Pricing is one of the key determinant in the decision making pcustomers.
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Pricing to the market
What can we do to make the price seems better?
Ex. Asking price of 299.000,- Euro seem better than 300.000,- Euro
Asking price on competing residence/comercial
Price sensetivity
In areas where there are easy to compare the real estate marketo changes in price
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Supply and demand
Price
Quantity
Demand
Supply
Equlibrium
Surplus
Shortage
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Supply and demand
Is it always like this for real estate?
What about the high end segmen
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Timing
When to buy and when to sell.
Season
How is the overall real estate market
Health of the economy
HandoverHave residensce buyers already sold their own
When to put out the ad online and in newspaper
What is the best day for a open house?
What time of day would be best for a open house
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Urban and rural real estate markand development
Most mayor cities are expanding
People move in to the cities, and away from the rural areas.
Urban sites are developing more services than rural places.
How does this affect the prices?
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Transportation and work
There is a connection between the possibilites for work, and h
Rural areas where workplaces are terminated or moved will affefor housing. When the market for buing proporties is no longer onas before, prices will fall.
When new possibilities for work apear, people will start looking fonearby.
Transportation and easy access will also have an effect on re
market in the local area.
With easy acces by transportation the area will be more attractivuse.
One key factor for many when they look for a new residence is i
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The globally real estate industri
Can we be optimists about the real estate future?
+ The health of the world economy is improving
+ The lending enviroment is improving
+ Risk appetite i heightende
+ The real estate market in big economies like Japan and severacountries where property sales are rising.
+ Housing data for the second quarter of 2013 in the US indicate market continues to gain strength.
- Europe
Sour
House price change% change over ayear earlier