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REAL 4000 UGA Dietz Exam 1 Study
Review Questions With Revised Answers
Five Main Product-Types or "Food Groups" and Others of CRE... (Corporate Real Estate) -
answer✔✔Industrial (e.g. offices, warehouses, garages, and distribution centers)
Multi-family (e.g. duplex, which has two dwellings within a single building, to homes or small
apartments buildings with up to four units)
Office
Retail
Other (e.g. storage units, churches, stadium, hospitals, student housing)
Hotel/ Resorts
How much is this property worth at a 6.8% capitalization rate? - answer✔✔net operating income
/ capitalization rate = $1,948,.8% = $28,656,000
"NOI" Net Operating Income - answer✔✔is one of the Golden numbers, represents how well the
machine works
tangible property - answer✔✔Physical asset that can be owned
Can be real or personal property
EX: Real property, (land and other assets that are permanently attached to the land) buildings,
canals, crops, fences, land, landscaping, machinery, minerals, ponds, roads.
EX: Personal property, (property that is moveable) vehicles, furniture, boats, and collectibles.
intangible property - answer✔✔Non-physical assets such as stocks, bonds, mortgages, leases
real estate as a tangible asset - answer✔✔"Raw" Land
Improvements to the land
Excavation and fill
Sewers and other utilities
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Roads and driveways
Structures (improvements on the land)
real estate as a bundle of rights - answer✔✔Exclusive possession of the real property (no
trespassing)
Use or enjoyment
Ex., can use as rental property to generate cash flow
Disposition (sale)
Can be unbundled in many ways
Ex., owner leases property to renter
term real estate used in 3 ways - answer✔✔1. Real Estate as a tangible asset
2. Real Estate as a bundle of rights
3. Real estate as an industry or profession
Real Estate makes up ___________ of the world's wealth - answer✔✔50%
real estate generates what percent of US GDP - answer✔✔25%
real estate generates what percent of local govt revenue - answer✔✔70%
real estate creates how many jobs for americans - answer✔✔9 million
developed land represents what percent of land in the US - answer✔✔6%
three markets in real estate - answer✔✔Local User Markets
Property Markets
Capital Markets
important distinction of property market - answer✔✔The property market is a function of the
Space (User) Market and the Capital Market
It is helpful to think of the Property Market as a result, NOT as a
Third market equal to the other two; though in reality they are all
Three independent concepts and can influence one another via
Their relationship.
user market (space market) - answer✔✔Market for the physical real estate
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"Buyers" receive right to use space
Called the "space" market or "rental market"
Where rental rates are determined
These markets are very "local" and usually highly competitive
Separate localmarkets for various property types: retail, office, industrial, etc.
demand side of user market - answer✔✔Individuals, households, & firms who require space
either for consumption or production purposes
supply side of user market - answer✔✔Real estate owners/ operators who rent space to tenants
Segmentation of User (Space) Markets - answer✔✔Both demand and supply side of user
markets are very specific to location & building type
User (space) markets are highly segmented!
(is the process of dividing a broad consumer or business market, normally consisting of existing
and potential customers, into sub-groups of consumers (known as segments) based on some type
of shared characteristic, e.g., geographic, demographic, psychographic, and behavioral.)
Compare to nationally integrated markets (gasoline, steel, financial capital; i.e., homogeneous
commodities that can be moved from place to place)
capital markets - answer✔✔RE competes for funds in capital market with other asset classes,
such as stocks and bonds
Investors select a mix of investments based on expected returns & risk
Bidding by investors determines:
Risk free rates of various maturities (i.e., the Treasury "yield" curve)
Required risk premiums(the investment return an asset is expected to yield in excess of the risk-
free rate of return...It represents payment to investors for tolerating the extra risk in a given
investment over that of a risk-free asset) for risky investments.
Public Capital Markets - answer✔✔Small homogeneous units (Shares) of ownership in assets
trade in public exchanges
Many buyers and sellers
Price quotes available for all to see
Characterized by a high degree of liquidity
