07. Alternative Investments Flashcards
What are the four tpes of real estate investment?
- Private equity (direct ownership),
- Publicly traded equity (indirect ownership),
- Private debt (direct mortgage lending), and
- Publicly traded debt (mortgage-backed securities).
What are the four types of commercial property? What drives demand for each?
- Office—Job growth
- Industrial—The overall economy
- Retail—Consumer spending
- Multi-family—Population growth
Describe the cost approach for valuing real estate:
Value is derived by adding the value of the land to the replacement cost of a new building less adjustments for estimated depreciation and obsolescence.
Describe thesales comparison approach for valuing real estate:
The sale prices of similar (comparable) properties are adjusted for differences with the subject property.
Describe theincome approach for valuing real estate:
Value is equal to the present value of the subject’s future cash flows over the holding period.
What is the cap rate for real estate investments?
cap rate = discount rate (r) − growth rate (g)
What are the three main types of publically traded RE securities?
- REITs
- Real Estate Operating Companies(REOCs)
- Mortgage-Backed Securities(MBS)
What are REITs?
- Real estate investment trusts
- Tax-advantaged companies that own income-producing real estate.
What are REOCs?
- Real estate operating companies
- Non-tax-advantaged companies that own real estate.
What are mortgage backed securities?
Investments in residential or commercial mortgages that are backed by real estate.
What are the main types of REITs?
- Equity REITs which take ownership stakes in income-producing property.
- Mortgage REITs(Debt) which invest primarily in mortgages, mortgage securities, or loans that use real estate as collateral.
What is the net asset value per share (NAVPS) for REITs?
The (per-share) amount by which a REIT’s assets exceed its liabilities, using current market value rather than accounting or book values.
