Real estate usually involves properties that cost so much that no one person has that amount of money. So what does one do to raise the capital needed to purchase real estate?
The answer is financial leverage. Financial leverage and real estate go hand in hand. Almost everyone cannot afford to pay cash for a house on the day they purchase it. Loans make purchasing real estate available to people who do not have the capital needed to purchase the house today.
This Forbes article describes some of the best ways to get capital to fund a real estate project.
http://www.forbes.com/2010/07/06/best-funding-sources-for-small-business-entrepreneurs-finance-dileep-rao_2.html
Some ways to get capital include:
Bank Loans
Family/Friends
Customers
Vendors
SBA(7) Loans
Local and State economic organizations
For some creative financing, this article states the IRS can deduct certain expenses so that will decrease the overall price.
This link provides the different types of mortgage loans one can use to purchase real estate:
http://www.realestatebriefings.com/mortgages/types-of-mortgage-loans/
1. Conventional mortgage - offers a fixed rate.
2. Adjustable rate mortgages - carry an interest rate that changes to keep pace with current market rates. This is a good idea for buyers planning to stay in their home for a short time.
3. Veteran Affairs loans - are great because they provide the opportunity to buy a home with no down payment.
4. Assumable mortgage - is a loan that stays with the property. It is simply transferred to the qualified home buyer.
I believe financing is good for real estate and loans are very important for the survival of the real estate market.
Sunday, November 4, 2012
Topic #7 Overview of Real Estate Finance 11/4
Real estate is a very broad category, thus leading to many different careers in real estate.
This website lists some of the numerous careers in real estate. http://www.realtor.org/realtororg.nsf/pages/careers
Certain careers include:
Real estate appraiser
Real estate broker
Real estate analyst
Property manager
Urban/land developer
Real estate counselors
Employers of the real estate profession is basically endless as most businesses conduct with real estate is some way or another. This website shows some of the major real estate firms in the United States. http://www.careers-in-finance.com/retop.htm
Some of the tops firms include:
Trammell Crow
Lincoln Property
JMB Realty
Grubb & Ellis
The real estate market took a huge hit when the "housing bubble" burst in 2007-2008. Today, it is improving with many cities seeing prices higher than before the housing bubble burst. Cities that weren't affected by the burst and are doing well today are cities like NYC, Houston, Dallas, LA. Cities hit hard by the crash include Detroit, Las Vegas, and Miami.
This website lists some of the numerous careers in real estate. http://www.realtor.org/realtororg.nsf/pages/careers
Certain careers include:
Real estate appraiser
Real estate broker
Real estate analyst
Property manager
Urban/land developer
Real estate counselors
Employers of the real estate profession is basically endless as most businesses conduct with real estate is some way or another. This website shows some of the major real estate firms in the United States. http://www.careers-in-finance.com/retop.htm
Some of the tops firms include:
Trammell Crow
Lincoln Property
JMB Realty
Grubb & Ellis
The real estate market took a huge hit when the "housing bubble" burst in 2007-2008. Today, it is improving with many cities seeing prices higher than before the housing bubble burst. Cities that weren't affected by the burst and are doing well today are cities like NYC, Houston, Dallas, LA. Cities hit hard by the crash include Detroit, Las Vegas, and Miami.
Topic #6 Overview of a real estate appraisal - 11/4
Real estate appraisal is the process of valuing real property. The value is usually in market value.
A real estate appraiser is someone who conducts a real estate appraisal. We need appraisals because the market value of real estate appreciates and depreciates and does not stay the same throughout time. We also need appraisals because every real estate property is unique and different than the next, so each will have a different market value.
There are 3 different methods of appraising a property. This article briefly explains each of the 3 in more detail:
http://homebuying.about.com/cs/appraisals/a/real_estate.htm
The 3 methods include:
1. Sales Approach Method - value subject property by comparing to similar properties recently sold.
2. Cost Method - value subject property by estimating the cost to replace the structure.
3. Income Approach - value subject property by estimating the income it will receive in the future.
Sales approach is best for properties with the most data. Cost method is best for new properties, and income method is best for properties used an investments that will generate a cash flow.
Appraisal are not always accurate. Bad information can cause an appraisal to be inaccurate. Here is a link that describes certain things one can do to challenge or change a bad appraisal.
http://www.aaronline.com/azr/2012/january/frustrated-by-appraisals.aspx
A real estate appraiser is someone who conducts a real estate appraisal. We need appraisals because the market value of real estate appreciates and depreciates and does not stay the same throughout time. We also need appraisals because every real estate property is unique and different than the next, so each will have a different market value.
There are 3 different methods of appraising a property. This article briefly explains each of the 3 in more detail:
http://homebuying.about.com/cs/appraisals/a/real_estate.htm
The 3 methods include:
1. Sales Approach Method - value subject property by comparing to similar properties recently sold.
2. Cost Method - value subject property by estimating the cost to replace the structure.
3. Income Approach - value subject property by estimating the income it will receive in the future.
Sales approach is best for properties with the most data. Cost method is best for new properties, and income method is best for properties used an investments that will generate a cash flow.
Appraisal are not always accurate. Bad information can cause an appraisal to be inaccurate. Here is a link that describes certain things one can do to challenge or change a bad appraisal.
http://www.aaronline.com/azr/2012/january/frustrated-by-appraisals.aspx
Topic #5 Overview of a real estate appraiser 11/4/2012
A real estate appraiser's job is to estimate the value of real property. Appraisers are needed because land and property does not have a defined value because all real estate is different. Here is a link describing what a real estate appraiser does, salary, and environment in which they work in.
http://www.bls.gov/ooh/business-and-financial/appraisers-and-assessors-of-real-estate.htm
An interesting fact this article states is that real estate appraisers employment is expected to grow 7% from 2010 to 2020. This is positive information that shows there is a demand for anyone looking to become a real estate appraiser.
So what all is required to become a real estate appraiser? This link summarizes the necessary requirements to become a real estate appraiser.
http://voices.yahoo.com/how-become-real-estate-appraiser-part-time-work-9160.html
There are 3 classes that a real estate appraiser can be.
1. License Appraisal Trainee - lowest class of an appraiser, in which 90 hours a classwork is required usually resulting in an associates degree.
2. Certified Residential Certificate - After receiving a license and completing 2000 hours and 30 hours of additional classwork one can get this certificate. This certificate allows appraisers a greater variety of real estate to appraise especially more expensive real estate.
3. Certified General Appraisers - Need an additional 60 hours. Appraisers who hold this certificate can appraise any property without limit to value.
A real estate appraiser's job is to estimate the value of real property. Appraisers are needed because land and property does not have a defined value because all real estate is different. Here is a link describing what a real estate appraiser does, salary, and environment in which they work in.
http://www.bls.gov/ooh/business-and-financial/appraisers-and-assessors-of-real-estate.htm
An interesting fact this article states is that real estate appraisers employment is expected to grow 7% from 2010 to 2020. This is positive information that shows there is a demand for anyone looking to become a real estate appraiser.
So what all is required to become a real estate appraiser? This link summarizes the necessary requirements to become a real estate appraiser.
http://voices.yahoo.com/how-become-real-estate-appraiser-part-time-work-9160.html
There are 3 classes that a real estate appraiser can be.
1. License Appraisal Trainee - lowest class of an appraiser, in which 90 hours a classwork is required usually resulting in an associates degree.
2. Certified Residential Certificate - After receiving a license and completing 2000 hours and 30 hours of additional classwork one can get this certificate. This certificate allows appraisers a greater variety of real estate to appraise especially more expensive real estate.
3. Certified General Appraisers - Need an additional 60 hours. Appraisers who hold this certificate can appraise any property without limit to value.
Sunday, September 16, 2012
TOPIC #4: Public Restrictions on Ownership 9/16
What are public or government restrictions on real estate? Provide examples of those restrictions. How do these restrictions affect real estate owners? Are there controversial restrictions?
Along with private restrictions on ownership, there are also public restrictions on ownership that the government applies. Here is a link that details some of the public restrictions.
http://faculty.business.utsa.edu/kfairchild/classes/3433/Outlines/OutlineCh4.pdf
These restrictions include:
Government Powers:
Taxation - Property Tax - Tax is levied as a % of value of the property
Eminent Domain - Government can acquire property for public use
Police Power - Enable governments to have the power of regulation to protect the public's health, safety, morals,and welfare.
Zoning - The process of dividing a community’s land into districts in which only certain uses of the land are allowed
Building Codes - are rules that control the design, materials, and methods of construction, and compliance w/them w/in their jurisdiction is mandatory.
These restrictions affect real estate owners beacuse one's real estate can literally be taken away through the government's use of eminent domain. Of course, the owner can be compensated, but if one's land has been in the family for hundreds of years and has sentimental value, that cannot have a price tag on it.
These restrictions are controversial because they are very broad and the government can say just about anything to not allow the owner to use the land as desired or even take the real estate away completely.
Below is a Link to an article talking about eminent domain and if its good or bad in this particular case.
http://realestate.aol.com/blog/2012/07/16/eminent-domain-a-worthy-fix-for-troubled-mortgages/
What do you think? Is eminent domain in this situation hurtful or harmful to the lendors, and homeowners?
Along with private restrictions on ownership, there are also public restrictions on ownership that the government applies. Here is a link that details some of the public restrictions.
http://faculty.business.utsa.edu/kfairchild/classes/3433/Outlines/OutlineCh4.pdf
These restrictions include:
Government Powers:
Taxation - Property Tax - Tax is levied as a % of value of the property
Eminent Domain - Government can acquire property for public use
Police Power - Enable governments to have the power of regulation to protect the public's health, safety, morals,and welfare.
Zoning - The process of dividing a community’s land into districts in which only certain uses of the land are allowed
Building Codes - are rules that control the design, materials, and methods of construction, and compliance w/them w/in their jurisdiction is mandatory.
These restrictions affect real estate owners beacuse one's real estate can literally be taken away through the government's use of eminent domain. Of course, the owner can be compensated, but if one's land has been in the family for hundreds of years and has sentimental value, that cannot have a price tag on it.
These restrictions are controversial because they are very broad and the government can say just about anything to not allow the owner to use the land as desired or even take the real estate away completely.
Below is a Link to an article talking about eminent domain and if its good or bad in this particular case.
http://realestate.aol.com/blog/2012/07/16/eminent-domain-a-worthy-fix-for-troubled-mortgages/
What do you think? Is eminent domain in this situation hurtful or harmful to the lendors, and homeowners?
Topic #3 Private Restrictions on Ownership 9/16
What are private restrictions on real estate ownership? Provide examples of those restrictions. How do these restrictions affect real estate owners?
Private restrictions are restrictions and limitations on the fee simple ownership rights that generally run with the land on real estate ownership. They can be and usually made by the government restricting the use of such land.
Types of restrictions include:
Covenants, conditions, restrictions - Are private encumbrances that limit the way a property owner can use a property
Liens - Is a claim on a property as either security for a debt or fulfillment of some monetary charge or obligation
Easements - It is a right given to one party by a landowner to use the land in a specified manner
Profit a prendre - Is a nonpossessory interest in real property that permits the holder to remove part of the soil or produce of the land
Adverse possession - Allows individuals to acquire title to land they do not own because they have openly possessed it for a statutory period of time
Encroachments - Is an unauthorized invasion or intrusion of a fixture, a building, or other improvement onto another person’s property
here is a link describing the certain types of restrictions:
http://legal-dictionary.thefreedictionary.com/Private+Land-Use+Restrictions
An example would be setting fire to the land. It is your land, why cant you set fire to if you wanted to? Well if it is near a school and the fire spread out of control, it can be a hazard. The government has many restrictions on the use of private land. Another would be that the government will allow something called an easement, which would allow a telephone company to route its line above or under someone else's private property ground. There are many restictions the government places on private real estate.
Here is a link describing how these restrictions effect owners.
http://www.alsa.ab.ca/easements-and-rights-of-way#Whatisaneasementorright-of-way
For example, an easement to allow an access road through ones land might not be a big problem, but what if that access road was in the middle of his corn crop? This would cause the owner to not harvest that section to allow the access road and therefor lose profit. These restrictions can have very negative effects on the owner of the real estate.
Private restrictions are restrictions and limitations on the fee simple ownership rights that generally run with the land on real estate ownership. They can be and usually made by the government restricting the use of such land.
Types of restrictions include:
Covenants, conditions, restrictions - Are private encumbrances that limit the way a property owner can use a property
Liens - Is a claim on a property as either security for a debt or fulfillment of some monetary charge or obligation
Easements - It is a right given to one party by a landowner to use the land in a specified manner
Profit a prendre - Is a nonpossessory interest in real property that permits the holder to remove part of the soil or produce of the land
Adverse possession - Allows individuals to acquire title to land they do not own because they have openly possessed it for a statutory period of time
Encroachments - Is an unauthorized invasion or intrusion of a fixture, a building, or other improvement onto another person’s property
here is a link describing the certain types of restrictions:
http://legal-dictionary.thefreedictionary.com/Private+Land-Use+Restrictions
An example would be setting fire to the land. It is your land, why cant you set fire to if you wanted to? Well if it is near a school and the fire spread out of control, it can be a hazard. The government has many restrictions on the use of private land. Another would be that the government will allow something called an easement, which would allow a telephone company to route its line above or under someone else's private property ground. There are many restictions the government places on private real estate.
Here is a link describing how these restrictions effect owners.
http://www.alsa.ab.ca/easements-and-rights-of-way#Whatisaneasementorright-of-way
For example, an easement to allow an access road through ones land might not be a big problem, but what if that access road was in the middle of his corn crop? This would cause the owner to not harvest that section to allow the access road and therefor lose profit. These restrictions can have very negative effects on the owner of the real estate.
Topic #2 - Property Rights and Legal Descriptions 9/16
What are property rights? ? How do they apply to our daily lives? Are there things to watch out for? What are legal descriptions?
This link provides some info on property rights:
http://en.wikipedia.org/wiki/Property_rights_(economics)
Property rights are given to the owner of a certain entity which gives them rights on how that entity is used.
They can include:
The right to use the good
The right to earn income from the good
The right to transfer the good to others
The right to enforcement of property rights.
An example of a property right would be a home owner who owns the land, as well as the air above the home. He/she may also own the mineral right underneath the home.
Property rights affect our daily lives in many ways. One being that it is illegal to be on someone else's property without permission. Unfortunetly we cannot freely roam this world. We must have permission from the owner of the entity that has the rights.
Things to watch out for when dealing with property rights include knowing all you can and reading the terms. For example, when buying a house. One may not put on the sales contract that the buyer is entitled to mineral rights. In that case, the buyer cannot object to the owner mineral rights even though they have the house above it. So it is very important to understand property rights.
Here is a link giving more detail of legal descriptions:
http://homebuying.about.com/od/glossaryl/g/Legal-Description.htm"
A legal description will define exactly where a property is located unlike a street address. Sometimes physical locations and legal descriptions dont always match up.
This link provides some info on property rights:
http://en.wikipedia.org/wiki/Property_rights_(economics)
Property rights are given to the owner of a certain entity which gives them rights on how that entity is used.
They can include:
The right to use the good
The right to earn income from the good
The right to transfer the good to others
The right to enforcement of property rights.
An example of a property right would be a home owner who owns the land, as well as the air above the home. He/she may also own the mineral right underneath the home.
Property rights affect our daily lives in many ways. One being that it is illegal to be on someone else's property without permission. Unfortunetly we cannot freely roam this world. We must have permission from the owner of the entity that has the rights.
Things to watch out for when dealing with property rights include knowing all you can and reading the terms. For example, when buying a house. One may not put on the sales contract that the buyer is entitled to mineral rights. In that case, the buyer cannot object to the owner mineral rights even though they have the house above it. So it is very important to understand property rights.
Here is a link giving more detail of legal descriptions:
http://homebuying.about.com/od/glossaryl/g/Legal-Description.htm"
A legal description will define exactly where a property is located unlike a street address. Sometimes physical locations and legal descriptions dont always match up.
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