b-h property legisation lecture 3

8/13/2019 B-H Property Legisation Lecture 3

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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

b-h property legisation lecture 3

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