Elsevier S & T

Private Real Estate Investment: Data Analysis and Decision Making

Brown, Roger J.

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Table of contents
  • Contentsvii
  • Prefacexiii
  • Acknowledgmentsxix
  • Chapter 1 Why Location Matters: The Bid Rent Surface and Theory of Rent Determination1
  • Introduction1
  • Classical Location Theory2
  • Notation Guide2
  • The Model3
  • Example #1---Two Competing Users in the Same Industry3
  • Example #2---Several Competing Users in Different Industries5
  • Is the bid rent curve linear?7
  • Empirical Verification8
  • An Economic Topographical Map12
  • Relaxing the Assumptions13
  • A Window to the Future16
  • References17
  • Chapter 2 Land Use Regulation19
  • Introduction19
  • Who Shall Decide---The Problem of Externalities20
  • The Idea of Utility23
  • The Model24
  • Optimization and Comparative Statics27
  • A Graphic Illustration28
  • Implications32
  • A Case Study in Aesthetic Regulation32
  • Conclusion36
  • References
  • Appendix: Comparative statics for Chapter 237
  • Chapter 3 The "Rules of Thumb": Threshold Performance Measures for Real Estate Investment39
  • Introduction39
  • Threshold Performance Measures40
  • A General Caution42
  • The Gross Rent Multiplier (GRM)43
  • What Not to Do44
  • What Should be Done45
  • Capitalization Rate (CR)49
  • The Three Bad Assumptions49
  • Capitalization Rate and Discounted Cash Flow Analysis50
  • Monotonic Growth52
  • The Expense Ratio and the "Honest" Capitalization Rate54
  • The Normal Approach to Data56
  • Questioning the Assumption of Normality60
  • The Stable Approach to Data62
  • Linear Relationships62
  • Linear Transformations64
  • Spurious Relationships64
  • Cash-on-Cash Return (C/C)67
  • Price per Unit (PPU)67
  • Other data issues71
  • References
  • Chapter 4 Fundamental Real Estate Analysis73
  • Introduction73
  • The Role of Computational Aids73
  • Deterministic Variables of Discounted Cash Flow Analysis75
  • Single Year Relationships and Project Data76
  • Multi-Year Relationships78
  • Sale Variables Relationships79
  • The Net Present Value81
  • Insight into the Analysis82
  • An Illustration of Bargaining87
  • Another growth function90
  • Data Issues93
  • Conclusion98
  • References
  • Chapter 5 Chance: Risk in General99
  • Introduction99
  • Objective and Subjective Risk100
  • Games of chance and risk bearing101
  • The utility function Revisited104
  • The "Certainty Equivalent" Approach107
  • Multiple (more than two) outcomes111
  • The continuous normal Case112
  • Conclusion116
  • References
  • Chapter 6 Uncertainty: Risk in Real Estate119
  • Introduction119
  • Non-normality---How and Where Does It Fit?119
  • The Continuous Stable Case121
  • Producing a Stable pdf123
  • Still More Distributions?126
  • Enter Real Estate127
  • Determinism128
  • Determinism and House Prices131
  • Determinism and Real Estate Investment135
  • Risk and Uncertainty138
  • Rolling the Dice141
  • Real Estate---The "Have it Your Way" Game145
  • The Payoff147
  • Data Issues150
  • Conclusion152
  • References
  • Chapter 7 The Tax Deferred Exchange157
  • Introduction157
  • Taxes are Less Certain for Real Estate Investors158
  • Variable Definitions160
  • The Structure of the Examples161
  • The Base Case: Purchase--Hold--Sell162
  • Example 1---Modifying the growth projection163
  • Example 2---The Tax Deferred Exchange Strategy167
  • Exchange Variable Definitions168
  • The Value of Tax Deferral173
  • The Sale-and-Repurchase Strategy: Tax Deferral as a Risk Modifier176
  • The Sale-and-Better-Repurchase Strategy: The Cost of Exchanging178
  • Example 3---Exchanging and The Plodder182
  • Data Issues185
  • Conclusion186
  • References
  • Chapter 8 The Management Problem189
  • Introduction189
  • The Unavoidable Management Issue189
  • The Property Manager's Dilemma190
  • Is Building Size Really Important?193
  • The Property Owner's Dilemma195
  • The "No Vacancy Rate" Approach195
  • Enter the Vacancy Rate197
  • Reconciling the two problems198
  • Data Issues201
  • Conclusion202
  • References
  • Appendix: A Caution On the Use of Data to Construct Theories204
  • Making Vacancy and Rental Rates Reasonable204
  • The Model to End All Models205
  • Chapter 9 The Lender's Dilemma209
  • Introduction209
  • Lenders and Their Rules209
  • Appraisal techniques210
  • The Capitalization Rate Approach Versus the Mortgage Equity Approach210
  • The Lender's Perspective212
  • The Borrower's Perspective212
  • Irrational exuberance and the madness of crowds213
  • Bubble Theory---How High is Up?217
  • Positive Leverage217
  • The Lender as Governor221
  • Resolving the Conflict222
  • Three Two-Dimensional (2D) Illustrations224
  • Endgame227
  • Data Issues231
  • Conclusion235
  • References
  • Chapter 10 The Private Lender237
  • Introduction237
  • The "Hard Money" Loan Versus the "Purchase Money" Loan238
  • The Diversification Problem238
  • Other Possibilities239
  • Did We Make a Loan or Did We Buy the Property?240
  • The Installment Sale242
  • The Motivation of the Parties244
  • The buyer244
  • The seller245
  • The Installment Sale Transaction248
  • Is the seller's financing a good deal for the buyer?248
  • The NPV Test249
  • An IRR Test250
  • A Simple "Tax Blind" Test250
  • A Prepayment Penalty253
  • Conclusion255
  • Reference
  • Chapter 11 Creative Financing259
  • Introduction259
  • Retirement and Creative Financing259
  • A Life Estate260
  • A Zero Coupon Bond261
  • The Retiree's Dilemma261
  • The Conventional Arrangement262
  • The Reverse Amortization Mortgage265
  • Intra-Family Alternatives267
  • The Income Viewpoint268
  • The Larger House Viewpoint269
  • The Remainderman's Position271
  • The Income Case271
  • The Larger House Case272
  • Conclusion273
  • References
  • Index277
Book details
  • Vendor Elsevier S & T
  • SKU 9780121377519
  • ISBN-13 9780080480367
  • Author Brown, Roger J.
  • Category Business & Economics
  • Subject Business Mathematics

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Description eBook delivery & access Reviews
Fiduciary responsibilities and related court-imposed liabilities have forced investors to assess market conditions beyond gut level, resulting in the development of sophisticated decision-making tools. Roger Brown's use of historical real estate data enables him to develop tools for gauging the impact of circumstances on relative risk. His application of higher level statistical modeling to various aspects of real estate makes this book an essential partner in real estate research. Offering tools to enhance decision-making for consumers and researchers in market economies of any country interested in land use and real estate investment, his book will improve real estate market efficiency. With property the world's biggest asset class, timely data on housing prices just got easier to find and use.

*Excellent mixture of theory and application
*Data and database analysis techniques are the first of their kind
*CDROM contains pre-written code for data analysis tailored specifically to real estate settings