harvard summer school summer 2020 mgmt s-2035: principles

Harvard Summer School Summer 2020 MGMT S-2035: Principles of Real Estate Instructor: Teo Nicolais

DRAFT Syllabus

© 2020 Teo Nicolais Revised June 22, 2020 of 18

Instructor: Teo Nicolais, President Nicolais, LLC [email protected] Class Meeting Time: Pre-Produced Online Lectures Posted Tuesdays and Thursdays at 6:30pm US Eastern Class Format: Students watch pre-produced, online lectures at their convenience. There is no mandatory attendance. Section Meetings: Mondays and Wednesdays at 5:30pm US Eastern All sessions are recorded for later viewing. Support Staff E-mail: [email protected] Course Website: https://canvas.harvard.edu/courses/72740

Note: Lectures are Not Held Live –They are Pre-Produced Episodes for You to View at Your Convenience

Aside from the lectures, the course operates just like a live class including the opportunity to meet with the Instructor and teaching staff live several times each week.

The purpose of this course is to offer practical, real-world knowledge for engaging in Real Estate investment. It’s great for students pursuing an active fulltime career in the industry as well as to students interested in building wealth through passive Real Estate holdings. No prior real estate or finance background is required for this course. The first step in becoming an investor is understanding the fundamental nature of the great Real Estate stage. Students uncover the hidden forces that drive land values. They learn how market forces shape land use throughout a city, gain insight on why their city is laid out the way it is, and identify where future growth is most likely. Students also study the lifecycles of properties, neighborhoods, and cities. Students also learn that “The Real Estate Market” is not one but two parallel markets: the “Space Market” and the “Asset Market.” By studying the interaction between these two markets, students learn to how to monitor the Boom-Bust cycles which lead to investment opportunities. Equipped with a fundamental understanding of what drives Real Estate values, students receive intensive, hands-on experience building financial models, analyzing cash flows, and measuring returns of Real Estate investments. They also learn how to entrepreneurs raise capital from investors Special emphasis is placed on practical decision-making experience by working through real world investment situations and studying strategies for building wealth through real estate investment. Note: Principles of Real Estate has two companion follow-up courses, MGMT 2037: Real Estate Finance and Investment and MGMT 5805: Real Estate Enterprise Management. While each course can be taken individually, you will maximize your investment of time and energy by taking them in sequence.


DRAFT Syllabus


Students Have Taken This Class While Living In….

Course Format: This course is designed to be taken 100% online. In fact, students have taken this course on every continent except Antarctica. Here’s how it works: Each week features two pre-produced online lectures (broken up into three episodes for ease of viewing), two optional live section meetings, optional live office hours with the Instructor, and weekly problem sets. No special equipment is required to participate in lecture. While many students use their computer’s built-in webcam and microphone to join the discussion, it’s also common for students to communicate via the live online chatroom (and that is perfectly fine with us). Attendance is not mandatory. While you’re encouraged to tune into the live sessions, you can always access the video recordings of all course sessions which are posted to the Canvas Site after the lecture.

All assignments and exams are submitted online through the course Canvas Site. And taking exams is easy: you’ll have a 24 hour window during which you can start your exam which means you can take your exams at the time most convenient for you (more details on that below).

Far from a traditional “course website,” Canvas is a state of the art learning management system. We also utilize Discussions on Canvas to answer questions about Course Material as well as questions on Course Logistics.

Trained teaching assistants hold live, online section meetings throughout the week using Zoom to discuss the material in greater detail and offer office hours. For those of you new to the program, a "section" is like a mini-class that allows you to engage the material in a more intimate setting. Section meetings are optional.

If you are unable to attend lecture or section meetings, worry not - all lectures and sections are recorded and published to the course website for later viewing.


DRAFT Syllabus


Syllabus Table of Contents

1. Course Description and Overview…………………………....p. 1

2. Course Format……………………………………………….p. 2

3. Earn Your Harvard Real Estate Investment Certificate………p. 3

4. Lecture Topics and Course Calendar…………………..…p. 4 - 10

5. A Note About Course Logistics……………………………...p. 11

6. Weekly Assignments and Exams………………….………….p. 12 - 13

7. Readings…………………………………………....………...p. 14

8. Grading………………………………………………………p. 15

9. Other Logistics……………………………………………….p. 16 - 17

10. About the Instructor……………………………...…………..p. 18

Earn Your Harvard Real Estate Investment Certificate Principles of Real Estate is one of four courses which count towards your Harvard Extension School

Real Estate Investment Certificate. Through this professional graduate certificate, you become familiar

with a wide range of real estate asset types while learning how to analyze markets, value assets, raise capital

through debt and equity financing, and gaining other essential skills for a real estate investment career. To

earn your certificate you must take:

MGMT 2035: Principles of Real Estate

MGMT 2037: Real Estate Finance and Investment

MGMT 5805: Real Estate Enterprise Management

Elective: See the course catalogue for eligible electives

Note: You do not need to be a degree candidate or be pursuing your Real Estate Investment

Certificate to take this course. You can (and many students do) take these courses individually or to

satisfy other requirements for Harvard Extension School degree programs. For more information, please

visit:

https://www.extension.harvard.edu/academics/professional-graduate-certificates/real-estate-investment-certificate


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Course Calendar

Lecture 0: Getting Started Lecture 0 is a self-paced exploration of the various tools we use in this course to deliver a

great online experience for you. All of the information you need for this module can be

found on the Course Canvas Site.

Module 1: What is Real Estate?

Tue, June 23rd, 2020 – Lecture #1

Part 1: Welcome Home

1. What is Real Estate?

2. Reasons to Fall in Love with Real Estate

Part 2: Course Logistics and Coffee Prices

1. The Goals of this Course

2. Tips for Making the Most of this Course

3. When it Comes to Land, What are You Really Buying?

Part 3: Do Rents Drive Prices or Do Prices Drive Rents?

1. Ricardo's Law of Rents

Thu, June 25th, 2020 – Lecture #2

Part 1: What Makes Real Estate So Special?

1. Special Characteristics that Distinguish Real Estate from Other Economic Resources

Part 2: What Can You Do with Land?

1. A World of Land Uses

2. How Do you Determine the Highest and Best Use of a Property?

Part 3: What Shapes Your City’s Urban Structure?

1. Ricardo’s Law of Rents on a Large Scale

2. Urban Structure Models

3. Key Questions for Understanding Your City


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Course Calendar (Continued)

Module 1: What is Real Estate? (Continued)

Tue, June 30th, 2020 – Lecture #3

Part 1: What Determines a Property’s Value?

1. How are Structures and Land Fundamentally Different?

2. Property Value, Land Value, and Structure Value Explained

3. How Do We Determine a Structure’s Value?

Part 2: What is the Property Life Cycle?

1. What Causes a Structure’s Value to Decline Over Time?

2. When is it Time to Redevelop a Site?

Part 3: What is the Neighborhood Life Cycle?

1. The Five Stages of the Neighborhood Life Cycle

2. Finding Opportunities within Your Market

Problem Sets #1 and #2 Due at 6:30pm US Eastern

Module 2: Real Estate as a System

Thu, July 2nd, 2020 – Lecture #4

Part 1: What is the Space Market?

1. Finding Opportunities within Your Market (Continued)

2. The Market for the Use of Space

3. What Drives Demand for Certain Types of Real Estate?

Part 2: How is New Space Added to the Market?

1. The Three Key Development Questions

2. Pre-Development Feasibility Analysis

Part 3: The Real Estate System: A Tale of Two Markets

1. What is the Asset Market?

2. What is an Asset Really?

3. The Real Estate System

a. How are the Space Market and Asset Market

connected?


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Module 2: Real Estate as a System (Continued)

Tue, July 7th, 2020 – Lecture #5

Part 1: What is the Real Estate Cycle?

1. The Real Estate Cycle (a Historical Perspective)

2. How Can You Predict Rent Growth? Part 2: The Four Phases of the Real Estate Cycle

1. What’s Happening During Each Phase? 2. The Three Most Important Questions for Understanding

the Real Estate Cycle

Part 3: Strategies for Success Throughout the Real Estate

Cycle

1. What Stage of the Real Estate Cycle are We in?

2. Strategies for Success During Each Phase of the Cycle Problem Set #3 Due at 7:40pm US Eastern

Module 3: Investing in Real Estate

Thu, July 9th, 2020 – Lecture #6

Part 1: Essential Tools of Investment Analysis

1. How Do You Put a Price (i.e. "value") a Future Cash Flow?

2. The Present Value Formula Part 2: How Do You Value a Stream of Future Payments?

1. Practice Valuing Investments

2. Net Present Value: What is It Really and How Do You Calculate It?

Part 3: Making Good Investment Decisions

1. What is the Net Present Value Rule for Making Investment Decisions?

2. What is the Internal Rate of Return?

3. The Internal Rate of Return Rule for Making Investment Decisions

Part 4: How Do You Value a Really Long Stream of Payments?

1. Using the Perpetuity Formula to Value Real Estate Assets


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Course Calendar (Continued) Mon, July 13th, 2020: Problem Set #4 Due at 10:00pm US Eastern

(In order to help you prepare for the midterm, Problem Set #4 will be due on a Monday night and the

solution set will be released shortly after the 10:00pm US Eastern submission deadline.)

Tue, July 14th, 2020 – ***Midterm Exam (Covers Material from Lectures #1 – #5)***

o Exam Duration: Two Hours

o Exam Window:

Starts at 6:30pm US Eastern on Tuesday, July 14th, 2020

Ends at 6:30pm US Eastern on Wednesday, July 15th, 2020

Module 3: Investing in Real Estate (Continued)


Part 1: Valuing Investment Properties

1. Valuing a Property: The Direct Capitalization Approach

2. Capitalization Rates and the Net Income Multiplier

3. Key Questions for Evaluating Real Estate Investment Opportunities

Part 2: Financial Leverage and Real Estate

1. What is Financial Leverage?

2. Measurements of Financial Performance

3. What is Return on Equity and How Does Leverage Affect It?

4. Benefits and Risks of Leverage

Part 3: Tips for Getting Loans

1. Contents of a Good Loan Package

2. Tips for Getting Loans


DRAFT Syllabus



Module 3: Investing in Real Estate (Continued)

Tue, July 21st, 2020 – Lecture #8

Part 1: How Do Lenders Determine the Size of Your Loan?

1. The Three Constraints on Your Loan Size

2. What is Debt Service and How Do You Calculate It?

Part 2: Calculating Your Maximum Loan Amount

1. Measuring Your Debt Service Coverage Ratio

2. Examples of Loan Sizing

Part 3: Building a Basic Financial Model

1. The Four Main Sources of Real Estate Investment Returns

2. Components of a Financial Pro Forma

3. Richard Peiser’s Stage 1 Financial Analysis

Problem Set #5 Due at 6:30pm US Eastern

Thu, July 23rd, 2020 – Lecture #9

Part 1: Building a Basic Financial Model (Continued)

1. Key Questions for Evaluating Real Estate Investment Opportunities Revisited

2. Summary Analysis, Key Metrics, and Simple Ratios

3. Balancing the Real Estate Investment Triangle

Part 2: Developing a Multi-Year Discounted Cash Flow Analysis

1. The Six Fundamental Elements of a Discounted Cash Flow Analysis

2. How Do You Model Unleveraged Cash Flows?

3. Forecasting Your Property’s Future Sale Price

Part 3: Developing a Multi-Year Discounted Cash Flow Analysis (Part 2)

1. How Do You Model Leveraged Cash Flows?


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Module 4: Real Estate in the Real World

Tue, July 28th, 2020 – Lecture #10

Part 1: Raising Capital from Investors

1. Key Distinctions Between Lenders and Investors

2. Three Principles for Successful Partnership Structures

3. Example Partnership Structure

Part 2: Building Wealth Through Real Estate Investment (Part 1)

1. Financial Strategies for Maximizing Your Returns

2. Operational Strategies for Adding Value

Part 3: Building Wealth Through Real Estate Investment (Part 2)

1. Creating Value through Renovations

Part 4: Special Topic: Investing in Single-Family Homes, Townhomes, and Condos


Wed, July 29th, 2020 – Graduate Discussion Post #1 Due at 11:59pm US Eastern

(Applies only to students taking the course for Graduate Credit)


Part 1: What Caused the Great Financial Crisis?

1. How are Residential Properties Typically Financed?

2. What is Securitization and How was it Supposed to Help Homeowners?

Part 2: Collateralized Debt Obligations and Credit Default Swaps

1. How were Risky Tranches of Mortgage Backed Securities Made to Look Like “Safe” Investments?

2. What are Credit Default Swaps and Why were they so Dangerous?

Part 3: The Crash

1. What Happened When Subprime Mortgages Began to Default?

2. The After Effects and Lessons from the Crash

3. What Opportunities Did the Crash Create Going Forward?


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Module 4: Real Estate in the Real World (Continued)

Tue, August 4th, 2020 – Lecture #12: Final Review

Part 1: What Did We Learn Together (Part 1)

1. Top Eight Lessons from Lectures #1 - #5: The Nature of Real Estate

Part 2: What Did We Learn Together (Part 1)

1. Top Ten Lessons from Lectures #6 - #11: How Successful Real Estate Approach Their Craft

Part 3: What’s Next?

1. Further Recommended Material for Real Estate Enthusiasts 2. Where should you go from here?


Wed, August 5th, 2020 – Graduate Discussion Post #2 Due at 11:59pm US Eastern

(Applies only to students taking the course for Graduate Credit)

Thu, August 6th, 2020 – Final Exam (Covers Lectures #6 - #12)

1. Exam Duration: Two Hours

2. Exam Window:

a. Starts at 6:30pm US Eastern on Thursday, August 6th, 2020

b. Ends at 6:30pm US Eastern on Friday, August 7th, 2020


DRAFT Syllabus


A Note About Course Logistics

We have a phenomenal semester lined up for you – and a comprehensive support system to help

you succeed.

This syllabus is written to provide you with an overview of how the course works. It is not an all-inclusive

document on the mechanics of the course (that would take far too many pages!).

During the first week of class, you’ll receive detailed information on course logistics. Through examples

and video tutorials, you’ll find out everything you need to know about completing assignments, connecting

with your classmates, getting help from our trained teaching staff, and much, much, much more. If you

choose to join us for the class (and we hope you will!), there’s nothing you need to do before the first

week of class.

What you’ll find in the following pages is designed

specifically to address pre-registration questions (i.e.

things you’ll want to know before signing up such as

dates, exam information, and grading policies).


DRAFT Syllabus


Weekly Assignments and Exams

All weekly assignments and exams for the course will be completed online and submitted through our

Canvas site. The due dates for all assignments and exams can be found the Course Calendar above.

Weekly assignments are designed to have a high degree of instructional value: completing the assignments

will help you work through the material and discover insights on your own.

Assignments are typically due at

6:30pm US Eastern on the due

date. We cannot accept late

assignments for any reason. To

compensate for this policy, we drop

your lowest THREE problem set

scores before calculating your

semester grade.

There are two exams. The Midterm exam will cover the Lectures #1 - #5. The Final Exam will cover

Lectures #6 – #12. Both exams will be two hours in duration, carry equal weight, and will be administered

online.

You will have a 24-hour window during which you can take your exam. The examination window

starts when lecture would ordinarily begin on exam day and ends 24 hours later. You can take your exam at

any point during that examination window. Collaboration on exams is not permitted.


DRAFT Syllabus


Weekly Assignments and Exams (Continued)

Exams are administered via Proctorio, an easy-to-use online proctoring which allow you to take

your exam online anywhere and anytime during the examination window.

This easy to use service, which just like having an in-person proctor only it is

done via the internet, ensures the integrity of your exam while saving you the

expense and inconvenience of using an in-person proctoring facility.

Proctorio requires the use of a webcam and microphone on your computer. Most computers already have built-

in webcams and microphones. If you don’t have a webcam or microphone, third party vendors such as Amazon.com

sell them for anywhere from $5.00 to $50.00. (Keep in mind, purchasing a webcam is still much cheaper than hiring a

proctor and taking the time to schedule an in-person exam. Plus, you get to keep a cool new webcam!)

In addition, your computer must meet Proctorio’s minimum system requirements:

https://proctorio.com/system-requirements

More information on exams will be provided in Lecture 0: Getting Started.


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Readings (Optional) Our goal is to equip you with the tools you need to explore the exciting world of Real Estate both during

this class and beyond. Toward that end, we’ve narrowed down the readings in this course to two

exceptional textbooks which we think you will find to be valuable additions to your personal library.

1. Peiser, Richard B. and Hamilton, David. Professional Real Estate

Development: The ULI Guide to the Business, Third Edition

(Urban Land Institute, 2012).

ISBN-13: 978-0-87420-163-5

(1st and 2nd Editions are also fine)

2. Floyd, Charles and Allen, Marcus, Real Estate Principles, 11th Edition

(Dearborn RE Education, 2015).

ISBN-13: 978-1475421736, ISBN-10: 1475421737 (“Floyd and Allen”).

(8th, 9th, and 10th Editions are also fine)

Given the cost of textbooks some students choose to purchase previous editions of the textbooks.

This is totally ok with us.

For your convenience, we post the assigned readings from the most recent (i.e. “official”) edition of the

textbook as well as the corresponding pages from older editions of the textbooks. This makes it easy

for students using the previous editions of the texts to keep up with the assigned readings while still saving

money.

We will post the readings assigned for each lecture and the side-by-side list of pages from previous

additions during the second week of the course.


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Grading Your semester score will be automatically calculated using the weighting system below and you will be

awarded the higher of the two scores:

Weighting System #1:

Problem Sets: 30%

Midterm Exam: 30%

Final Exam: 30%

Final Project: 10%

Weighting System #2:

Problem Sets: 30%

Final Exam: 60%

Final Project: 10%

When calculating your semester grade, we will drop your THREE lowest Problem Set scores.

Graduate Credit:

Only students who are enrolled for graduate credit must complete a graduate project which will be assigned

after the Midterm Exam. The graduate assignment involves reviewing, analyzing, and evaluating several

real-life real estate investments using the tools of financial and investment analysis taught in the course.

Letter Grades:

Letter grades will then be assigned according to the following fixed scale:

Letter Grade

Percentage

of Semester

Points

Letter

Grade

Percentage of

Semester

Points

A 93% C+ 77%

A- 90% C 73%

B+ 87% C- 70%

B 83% D 65%

B- 80% E/F 0%

The percentages above represent the lower bound of the letter grade range and semester scores are rounded

to the nearest hundredth. For example, a student who earned an 86.99% would receive a B for the course.

A student receiving exactly 87.00% of semester points would receive a B+ for the course.


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Other Logistics

Prerequisites:

High school algebra. No prior real estate or finance background is required for this course.

Technology:

Microsoft Excel or Apple’s Numbers is required. Microsoft Office 365, which includes Microsoft

Excel is available on a subscription basis for $6.99 per month at www.microsoft.com. We offer

resources to support students who are not familiar with Excel however, since this course deals with

financial and investment analysis concepts, Excel is used frequently. You may use Apple’s

Number’s software as well (though the teaching staff uses Excel).

You MUST have a computer which meets Harvard Summer School’s the minimum Web-

Conference Technology Guidelines:

https://www.summer.harvard.edu/web-conference-technology-guidelines

In addition, your computer must meet Proctorio’s System Requirements:

https://proctorio.com/system-requirements

This is especially important for taking exams. Because our online proctoring software captures

video and audio during your exam, taking an online exam while running Microsoft Excel or Apple’s

Numbers can be resource intensive for your computer. Taking an exam with a computer that doesn't

meet the Web-Conferencing Technology Guidelines and Proctorio’s System Requirements may result in

significant system slowdowns, hang-ups, or even crashes during your exam.

Fair warning: We cannot make any accommodations for students who experience exam

slowdowns, hang-ups, or crashes if they are using a computer that doesn't meet the above

requirements. We've seen this happen and we don't want it to happen to you!

(Note: Proctorio collects information about your system specifications when you launch it.)


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Other Logistics (Continued)

Academic Integrity:

You are responsible for understanding Harvard Summer School policies on academic integrity

(http://www.summer.harvard.edu/policies/student-responsibilities) and how to use sources responsibly.

Not knowing the rules, misunderstanding the rules, running out of time, submitting the wrong draft, or

being overwhelmed with multiple demands are not acceptable excuses. To support your learning about

academic citation rules, please visit the Resources to Support Academic Integrity

(http://www.summer.harvard.edu/resources-policies/resources-support-academic-integrity) where you

will find links to the Harvard Guide to Using Sources (https://usingsources.fas.harvard.edu) and two free

online 15-minute tutorials to test your knowledge of academic citation policy. The tutorials are

anonymous open-learning tools.

Accessibility

The Summer School is committed to providing an accessible academic community. The Accessibility

Office offers a variety of accommodations and services to students with documented disabilities. Please

visit http://www.summer.harvard.edu/resources-policies/accessibility-services for more information.

Professional Conduct

Professional behavior is expected throughout the class. This means respectful communication. During

discussions and live sessions, civil discourse should be maintained at all times and comments should be

directly related to the course material at hand and aimed at moving the discussion forward. This does not

mean that students must always agree with others since reasoned, respectful dissention may be part of the

discovery process and lead to previously unconsidered options – however all comments should be civil

and respectful.


DRAFT Syllabus


About the Instructor Teo Nicolais is a real estate entrepreneur who loves to teach. Nicolais lives and breathes real estate as President of his real estate investment company, Nicolais, LLC, which invests in multifamily rental properties in the Denver metro area. Nicolais has twice served as Vice President of the Apartment Association of Metro Denver (AAMD) which represents over 237,000 apartment units and he sits on the Board of Directors of the Colorado Apartment Association which represents over 268,000 apartment units. Nicolais has served as Chair of the AAMD’s Independent Rental Owner’s Council, a Director of the US Fund for UNICEF, and is member of the Urban Land Institute. He was also named the Apartment Association of Metro Denver’s Person of the Year. Prior to starting his own investment company, Nicolais served as the Director of Finance and Acquisitions for a $500 million real estate investment company in Illinois active in the development and management of apartments, condominiums, single-family homes, office, and retail properties. Nicolais personally identified and negotiated the purchase of new investments and arranged financing using equity, taxable and tax-exempt bonds, institutional debt, and conventional bank loans. Nicolais also managed the due diligence process for new acquisitions and worked directly with the firms’ principals on capital allocation strategies. Throughout his professional life, Nicolais has always made time to teach. Nicolais recently taught his 81st course at the Harvard Division of Continuing Education including 32 of his own real estate courses with a cumulative enrollment of over 12,100 students since Nicolais starting teaching. Of the four courses required for Harvard Extension School’s Real Estate Investment Certificate, three are taught by Nicolais. To date, over 3,800 Harvard students have taken his Real Estate courses. His students recently honored him with an overall rating of 5.00 out of 5.00 in their course evaluations and the Harvard Extension School awarded him with the Joanna Fussa Distinguished Teaching Award and the Dean Michael Shinagel Award. Nicolais has received the “Harvard Extension Student Association’s Student Choice Award” twice. He earned his bachelor’s degree from Harvard College with a concentration in economics. As part of his undergraduate academic work, he studied advanced real estate finance at the Harvard Graduate School of Design and accounting at the Massachusetts Institute of Technology (MIT).

harvard summer school summer 2020 mgmt s-2035: principles

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