Louisiana State University - EXAM 1: Exam 1 Material

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Exam 1 Material Chapter 1: The Nature of Real Estate and Real Estate Markets An Introduction to Real Estate  Real estate is the single largest component of wealth in our society › Appx. ½ of... the world’s total economic wealth The term “real estate” is used in 3 ways: 1. Tangible assets › 1. Improvements on the land = fixed structures 2. Improvements to the land = making land suitable for construction, etc. (often referred to as infrastructure. Walkways, drainage, electric, excavation and fill) 3. Raw land. › Real property is fixed to the land. Personal property is moveable Real Estate Markets and Participants  Real estate values derive from the interaction of 3 sectors of the economy › User Markets Chapter 2: Legal Foundations to Value The Nature of Property  Rights are claims or demands that our government is obligated to enforce Chapter 3: Conveying Real Property Interests  Conveyance of real estate interest is uniquely complicated o Real property is a complex bundle of rights Chapter 4: Government Controls and Real Estate Markets The Power of the Government to Regulate Land Use Most of the real property in the U.S. is privately owned.  Unregulated competitive bidding would bring about the most productive use of each parcel and the price paid for the parcel would exactly reflect its usefulness, but this doesn’t happen for a few reasons Chapter 7: Valuation Using the sales comparison and Cost Approaches Market Value, Investment Value, and Transaction Prices  Values of real estate cannot simply be determined in the market. They must be estimated because real estate has unique characteristics of heterogeneity, infrequent purchases, and immobility Chapter 8: Valuation Using the Income Approach  Owners anticipate that they will receive cash flows from the property due to rental income and price appreciation.  Other valuation approaches are most appropriate for non-income producing properties  Income capitalization – converting periodic income into a present value estimate  Measure of income generally sought by valuers is annual net operating income (expected annual rental income, net of vacancies, minus operating and capital expenses) o Owners don’t always get full amt due to taxes and borrowing fees [Show More]

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