Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Real Estate Terms > Basics Part 1 - Assess the Property Market > Flashcards

Basics Part 1 - Assess the Property Market Flashcards

1
Q

What does take “A RIDE” : Evidence stand for?

A

A = Actual Evidence

R = Ratio of Affordability 
I = Interest Rates
D = Demand and Supply
E = Employment and Economy
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What’s the 1st Fundamental Principle of Property Investing?

A

It MAKES MONEY, consistently over time and is the most common vehicle for wealth amongst the wealthy

It makes REGULAR INCOME and CAPITAL APPRECIATION

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Why do we do take A RIDE ?

A

To assess where the markets at and where it may be going in the near future (for any market big/small)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What does ACTUAL EVIDENCE mean?

A

What do we “Actually” KNOW about what’s going on in the property market at the moment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

When we’re looking at market evidence, is it better to look at short term evidence or have a longer term view?

A

It’s much better to have a LONGER TERM EVIDENCE, to be confident about our decisions.

Ie. 50 year price chart growth vs. 1 year price chart growth

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

On average, in the UK, how much % has property prices increased per year for the last 1000 years?

A

10.2% per year

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is the Rule of 72?

A

Take the number 72 and divide by rate of annual % growth will give you how long it takes for the asset to DOUBLE in value.

       72  ————-—— = 7.05 years % growth rate    (10.2%)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What does the “actual evidence” tells us about property market?

A
  • That over the long term, prices will go up.

- There’s “wobbles” in the market that create opportunities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What’s the 2nd Fundamental Principle of Property investing?

A

EVERYBODY has to live somewhere, irregardless of the market place and prices

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

In the UK, what happened to the Private housing rental sector that was so significant?

A

It surpassed the social housing sector and is now the number 2 provider of rentals

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Because everyone has to live somewhere all the time, what is the opportunity in this?

A

When the market is rising go for capital first

When it’s static or falling go for the income first or residual (cashflow)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

When assessing your Actual Evidence, what are some important key factors?

A
  • Longer term is more reliable
  • Different evidence data for different housing types; flats, units, houses
  • 3rd party and independently accredited
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What are the different levels of “Evidence” in terms of reliability?

A
  • General - newspaper, TV, Radio, Taxi Driver conversations, Aunty Flo (unreliable)
  • Local - www.checkmyarea.com (little bit more reliable)
  • Comprehensive - www.whizzamania.com
  • Very Specific - www.zoopla.co.uk ; Mouse Price
  • Very Exact Information - Govt. Land Registry website
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Apart from market trends and data, what other ACTUAL evidence is important to note?

A
  • Income Returns
  • Number of Mortgages; also the LTV/LVR, styles of mortgage products
  • Amount of mortgages - and types
  • Number of Sellers and Buyers
  • Speed and strength of sale
    • # of days
    • Asking-to-Offer price ratio
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What generally does the number of sellers and buyers tell us about the market?

A

Demand

5 buyers vs. 55 Sellers is a flooded market and vice verse

These figures are usually issued by conveyancing groups or real estate agent groups

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Actual Evidence needs to be __________, ___________ and ___________.

A

Actual evidence needs to be Credible, Reliable and Fundamental.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What is Rainbow Chasing?

A

Rainbow chasing is chasing PREVIOUS DATA.

If a market has already shown to increase last year by 20-25%, the chances that the same suburb will increase by 20-25% again this year is very slim, UNLESS there’s other evidence to support it.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

The R for Ratio is about telling us how ___________ property prices are.

A

The R for Ratio is about telling us how AFFORDABLE property prices are.

Average house price
—————————- = Ratio
Avg. Salary

19
Q

If the Ratio is BIG it means that __________. If the Ratio is SMALL it means that ______________.

A

If the Ratio is big it means that LESS AFFORDABLE. If the Ratio is small it means that MORE AFFORDABLE.

150k house 150k house
————— = 10 Vs. —————— = 3
15k salary 50k salary

20
Q

If houses are MORE affordable, what does this mean for the market?

A

It usually means DEMAND is going up because it’s easier and more affordable to purchase houses

21
Q

If there’s a small Ratio in an area that has a cheaper median house price what could this potentially mean?

A

If there’s a small Ratio (ie. HIGH AFFORDABILITY :. potentially higher demand) in an area where the median house price is cheaper than the country, it potentially means that this is a good place to INVEST.

Because people can afford to buy, demand is going up and it’s cheaper to get a house.

22
Q

What is the general long term interest rate?

A

Roughly around 4-6%

23
Q

Does it matter what interest rate is when deciding whether to invest?

A

No.

All you require to do is find the deals that function for that particular interest rate, at that point in time.

24
Q

If interest rates are too high, then what could you potentially do?

A

You could basically borrow your money in a different currency, from another country that has a more favourable, cheaper interest rate.

25
Q

What is mortgage rate vs. interest rate?

A

Mortgage rate is usually higher and, is the rate that includes the “cut”, that the mortgage lender/banks get.

26
Q

If demand is high, but the supply is static the price is…?

A

If demand is high, but the supply is static the price is GOING UP.

27
Q

If demand comes out of the market place, but the supply is static the price is…?

A

If demand comes out of the market place, but the supply is static the price is GOING DOWN

28
Q

What other levels can we assess demand and supply?

A
  • Nationally
  • Regionally
  • Locally
29
Q

In the UK, what was published regarding the “normal demand”?

A

260,000 new homes need to be built every year, but they have built only an average of 115,000 houses a year

That there is a shortfall of 1 million houses in order to adequately house the population.

It also implies that this is up to the private rental sector to take over as social housing will not be filling this gap anytime soon

30
Q

What does the 1 million housing shortage mean?

A

It means that the Supply is nowhere near enough to support the demand, and this is what will support the LONG TERM housing prices to continually improve

31
Q

What is a social housing waiting list?

A

It’s a list for people waiting to be put into social housing, in different areas of the country, when the supply for it comes up.

32
Q

An empty is a _________________.

A

An empty is a property that doesn’t have a tenant or is un-rented

33
Q

Why can’t we match the number of empties (737,000) with the amount of demand that’s occurring in the country?

A

Because the empties (the supply of housing) is up north, where there’s not a lot of employment, but the demand is mainly down south

34
Q

Just because there’s high demand in a specific area, doesn’t necessarily mean what?

A

Just because there’s high demand in a specific area, doesn’t necessarily mean there’s HIGH DEMAND FOR ALL PROPERTY TYPES IN THAT AREA.

You still require to check into which type of property is in high demand; flats, units, houses etc

35
Q

When regarding demand and supply, what do you have to look for?

A
  • Look for specifics - your - locations
  • Housing Policies - govt sale of social housing?
  • Get to know the local council
  • Look for grants:
  • Empty Home’s Officer - udp and housing office - www.[town].gov.uk
36
Q

What is a udp?

A

Unitary development plan - what they’re going to do in the local areas regarding building houses and purposes

37
Q

Why should we check

www.[town].gov.uk for local councils/areas?

A

Because you get familiar with the local area and what they’re doing.

Also you can see if there’s grants available that encourage people to invest in the area

38
Q

Why are E = Employment figures important?

A

Because if people have jobs (employment) and a regular source of income, they’re more likely to buy houses and committing to a mortgage

39
Q

We need to consider employment, not just nationally but ___________ as well.

A

We need to consider employment, not just nationally but LOCALLY as well.

40
Q

Within unemployment figures what are there?

A

There are SECTORS of demographics. For example, youth unemployment (generally rent) and elderly unemployment

41
Q

Where can you see the unemployment rates in a country?

A

The Economy Tracker

42
Q

What 3 main things do we consider in E = unemployment and Economy?

A
  • Employment rates - local and overall
  • Look at LOCAL economy - jobs, EU investment, etc
  • Also bigger picture - GDP figures
43
Q

What does the Gross Domestic Product(GDP) represent?

A

It represents the OUTPUT of the country, if the GDP is high, generally the ECONOMY is increasing.

44
Q

How does GDP impact property purchases?

A

If the GDP for a country is HIGHER compared to neighbouring countries, it generally shows that the economy is greater and expanding.

That other countries with lower GDP would come into the country to get jobs/work, driving more DEMAND into the country. (Generally the live in HMOs)

Real Estate Terms (4 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions