The importance of following B-H property legislation

The upside of following legislation

You get a guideline Will seem like a serious actor in the publics eye. Lesser chance for lawsuites

What are the consequnses of not following legislations

Lawsuites Fired Losing your license

The firm will lose its license

Bad reputation

 Ex.
Evulation for new loans Not giving out required/statutory information The dees was not registered

Real estate finance and investments

Real estate finance includes the study of the institutions, markets, and instruments used to transfer money and credit for the purpose of developing or acquiring real property
Real Estate Finance by Clauretie and Sirmans

The financial market

Capital Market
Long term securities More than 1 year maturities Most real estate financing takes place in the capital market
Mortgages

Money market
Short term securities Maturities of 1 year or less

In real estate:
Short term acquisition Development loan Construction loan

Refinanced with long term loans when the project is complete.

Real Estate capital market

Dept Equity

Real Estate capital market

Dept
Bank lending Municipial lending Loans from family or friends

Equity
Deposits/Cash Familie or friends

Grants
In additions when starting/running a real estate agency

Individuals or entrepreneurs
Employee ownership

20% of something is more than 100% of nothing

Practical considerations in the use of dept to finance real estate

Interest rates Tax regulations
Can operating losses from real estate be used to offset other income and the tax rate.

Can interest be used reduce taxes.

Risk of property and bankrupcy

If operating cash flow from the proporty fails to cover the dept service you risk foreclosure

Acces to equity
How mutch quity Vs. dept

Flow of funds in the savings-Investment cycle

Deposits etc. Securities notes etc.

Surplus income units - Individuals - Businesses - Goverments

$ Savings

Indirect Finance - Banks - Life insurance companies - Investments companies - Pension funds

$ Funds

Deficit income units - Individuals - Businesses - Goverments

Direct Finance Brokers Mortgage bankers

Mortgages Securities

Secondary Mortgage Market

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

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

Where to get funds and alternativ financing

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 have all impacted the private equity funds in the real estate market over the past several years

Second loan
From bank or other credit institutions.

Seller finance
You make mortgage payments directly to the person you bought the house from.

Lease to buy

Advanced real estate principles

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

Pricing to the customer

What price do we charge for our services? What can we do to make our price seem a little more attracitve? Are the prices public, or only given to those who ask? It is importent to find out how much your target market will pay for your service. Pricing is one of the key determinant in the decision making process for customers.

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 market will be sensitiv to changes in price

Supply and demand

Supply Surplus

Price

Equlibrium

Shortage Demand

Quantity

Supply and demand

Is it always like this for real estate? What about the high end segment?

Timing
When to buy and when to sell.
Season How is the overall real estate market Health of the economy

Handover Have 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

Urban and rural real estate markets and 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?

Transportation and work

There is a connection between the possibilites for work, and housing prices.
Rural areas where workplaces are terminated or moved will affect peoples need for housing. When the market for buing proporties is no longer on the same level as before, prices will fall. When new possibilities for work apear, people will start looking for residence nearby.

Transportation and easy access will also have an effect on real estate market in the local area.
With easy acces by transportation the area will be more attractive for comercial use. One key factor for many when they look for a new residence is infrastructure.

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 several other Asian countries where property sales are rising.
+ Housing data for the second quarter of 2013 in the US indicate the housing market continues to gain strength. - Europe

House price change% change over a year earlier

Source: Federal Housing Finance Agency