The Market for Real Estate Knowledge

Chapter 1

• Real Estate - Physical Land and Attached Structures

What is Real Estate?

• Fixed location• Uniqueness of each parcel– Topography and External Factors (Beach)

• Interdependence of land uses – Residential and Retail

• Long life & Long-term commitments• Large transactions• Long gestation (development) period

What are the Attributes of Real Estate?

• The real estate body of knowledge consists of four broad collections of concepts:

– legal analysis concepts

– market analysis concepts

– real estate service industry concepts

– financial and investment analysis concepts.

The Real Estate Body of Knowledge

• Property rights – Real Property - Legal Interest in land and structures

attached to the land

• Restrictions on property rights (public and private)

• Deeds and legal descriptions• Leases• Contracts• Title transfer issues

Legal analysis concepts

• Real estate market dynamics– real estate space market • How many units to build?

– real estate asset market• What is the return on investment?

– real estate development industry• The Real Estate Entrepreneur

• Urban growth models

Market analysis concepts

• Real estate brokerage– Single family

– Commercial/Industrial

– Farms and Land

• Real estate appraisal– mortgage, tax, ROW, estates

• Property management– Value Added

– Asset management (restaurants, discount)

Real estate service industry concepts

• Other Private Sector Jobs– Development/construction (corp., spec/fee)

– Real estate finance (bankers v. brokers)

– Consulting (land use and zoning, investment)

– Investment Analysis & Portfolio Management

Real estate service industry concepts

• Public Sector Jobs– Public Housing Administration

– Property Tax (Ad Valorem)

– ROW (highway and utility)

– Land Use Planning (City Planners/ Zoning)

Real estate service industry concepts

• financing methods (Debt vs. Equity)

• time value of money concepts– Six functions of a dollar / NPV & IRR

• mortgage mechanics– Fixed vs. Variable Rate Mortgages

• investment property analysis

• development project or market analysis

Financial and investment analysis concepts

Market Model for Real Estate

• What is a market? (A place of Exchange)• What is demand? (The Amount Desired)• What is supply? (The Amount Available)• Where do supply and demand come from?

– Human Needs and Wants

– How to provide for these needs and wants with limited resources. (The central question in RE economics)

• How do supply and demand interact?– Supply is Upward Sloping / Demand is Downward

– Equilibrium

Market Model for Real Estate Knowledge

• Principle of supply and demand applied to the market for real estate knowledge– Due to the increasing complexity of Real Estate

Markets greater levels of specialized knowledge are necessary

– So What?

– For those willing to study, more high paying jobs should be available in the Real Estate field in coming years