Chapter 1 Real Estate Principles: A Value Approach Flashcards

Chapter 1 Real Estate Principles: A Value Approach Flashcards

The term real estate is used in three fundamental ways:1) to identify the tangible assets of land and buildings; (2) to denote the "bundle" of rights associated with the ownership and use of the physical assets; and (3) to refer to the industry, or business activities, related to the acquisition, operation, and disposition of the physical assets.Improvements on the land includeany fixed structures such as buildings, fences, walls, and decks Personal Propertymovable items such as automobiles intangible assetsnonphysical assets such as patents and copyrights Private Markets (Equity/owners)Individuals, partnerships, limited liability corporations, private equity funds User Marketscompetition among users for physical locations and space Immobile ProductsMoving a building to a new site is not feasible If rental rates and their riskiness are determined in the space market, and required risk premiums are largely determined in the general capital markets, what role do local property (asset) markets play?rental rates and their riskiness are determined in the space market, and required risk premiums are largely determined in the general capital markets, what role do local property (asset) markets play?Real estate market activity is influenced by the activities and conditions that take place in three sectors of a market economy the user market, (2) the financial or capital market, and (3) the property market. Real estate users compete in the market for location and space.Private Markets (Debt/lenders)Banks, insurance companies, finance companies, private lenders Real estate typically generates ________of U.S. gross domestic product (GDP), over 25 percent of U.S. gross domestic product (GDP), Bundle of RightsAn ownership concept describing all the legal rights that attach to the ownership of real property.localized marketspotential users of property and competing sites generally lie within a short distance of each other Landoften used to refer to a building site, or lot, and includes the infrastructure but not any structures acre43,560 square feet Real estateLand and Utah permanent improvements Property marketsDetermines the required property-specific investment returns, property values, capitalization rates, and construction feasibility segmented marketshighly segmented due to heterogeneous manner of the products, oftentimes it is segmented by price Public Markets (debt/lenders)Commercial mortgage backed securities (CMBS) and mortgage REITs

Improvements to the land includecomponents necessary to make the land suitable for building construction or other uses Public Markets (Equity/owners)Publicly traded real estate investment trusts (REITs) and real estate companies propertyanything of value that is owned or possessed Capitalization Rateratio of a property's annual net income from rental operations to its value, is a fundamental pricing metric in commercial real estate markets.Real property is used interchangeably with Real estate Capital marketsserve to allocate financial resources among households and firms requiring funds. Participants invest in stocks, bonds, mutual funds, private business enterprises, mortgage contracts, real estate, and other opportunities with the expectation of receiving a financial return on their investment.raw landlarger area that does not include any improvements Two primary characteristics of real estate assets areHeterogeneity (each property has it's own unique features), Immobility (moving a building is sometimes feasible but it is oftentimes cost prohibitive and oftentimes it is much easier to demolish it) heterogeneous productseach property has unique features tangible assetsphysical things, such as automobiles, clothing, land, or buildings