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FIN336 - FINAL EXAM STUDY GUIDE.
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FIN336 - FINAL EXAM STUDY GUIDEch1
What are the different types of managed properties?
Residential → single family homes, apartments
Office → small office buildings, high rises
Retail → stand alone buildings, strip malls, local shopping centers
Industrial → warehouses, manufacturing facilities, can be stand alone or
apart of an industrial park
Special Purpose Properties → hospitals, nursing homes, schools, places of
worship, hotels, resorts, etc.
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Career opportunities
Property management companies, real estate brokerages, financial
institutions, large corporations, institutional owners
Positions: site manager, property manager, regional and executive
manager, asset manager
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Professional development
Institute of Real Estate Management (IREM) → founded in 1933, includes
residential and commercial real estate managers, offers courses and
conferences
,Building Owners and Managers Association (BOMA) → 1907, members
own, manage, develop, and supply commercial properties
National Apartment Association (NAA) → 1939, organization ofs state and
local apartment housing associations, includes apartment managers,
developers, builders and suppliers
National Association of Residential Property Managers (NARPM) → 1988,
organization of property managers who specialize in managing single
family homes and other small residential properties
International Council of Shopping Centers → 1937, an organization for
retail property managers, marketers, and investors
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Business cycle
Returns depend on factors that are external to the property itself, such as
economic forces and social trends
A business cycle has three stages: Prosperity, recession, and recovery
Prosperity → a period of sustained, stable growth and overall economic
health, employment is high and people earn enough income to pay for
basic necessities with cash left over, as consumer spending increasing so
does expansion. Leads to increased demand until we enter a recession.
Recession → the economy slows down and occurs when the GDP declines
for 6 months, unemployment is high, a severe long term recession is a
depression. Recessions are inevitable
Recovery → at some point prices will decline in a recession enough to the
point where consumers can once again start purchasing, and eventually
once consumption increases then a period of prosperity will begin
,Business cycles can be short or last for a number of years, so a property
manager should always have an eye on economic news
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Real estate cycle
During prosperity, developers will jump on a number of projects trying to
take advantage of the big profits available, but as more projects get built, a
period of overbuilding begins and the number of new units exceeds the
demand for them, dropping prices.
Instead of reaping profits, developers end up needing to cut rent, known as
adjustment in the real estate cycle, it corresponds with the recession
phase.
As the cycle bottoms out, after a period of stabilization, a new phase of
development will begin, corresponding with the recovery phase
A real estate cycle may or may not coincide with general business cycles,
they can be local or regional, or national
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Factors affecting supply and demand
Social and business trends:
Population changes, business cycles, demographic changes, technological
changes, social trends, government factors
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How much do you want to pay for a property
, Appraisers use the amount of income generated by the property to
estimate the property's market value
Income approach to value
Takes the property's annual net operating income and divides it by the rate
of return that the investor expects, which is called the capitalization rate
NOI / Capitalization rate = value
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government factors
Monetary policy, regulation of lending institutions, mortgage industry
involvement, tax policy, environmental and land use laws
interest rates and money supply,
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social and business trends
population changes, business cycles and real estate cycles, demographic
changes, technological changes, social trends
ch2
real estate investment
advantages & disadvantages
Advantages → Cash flow, appreciation and equity, leverage, tax deductions
Disadvantages → Illiquidity, risk of loss, cash outlay, expert knowledge,
immobility and permanence
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