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Principles Of Real Estate > Mid Term > Flashcards

Mid Term Flashcards

1
Q

Four urban structures models

A
  1. Concentric circle
  2. Axial
  3. Sector
  4. Multiple nuclei
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2
Q

Concentric Circle Model

A
  • pure bud rent
  • zones radiate outward
    1. CBD
    2. Transition (industry, manufacturing, slums)
    3. Lower income (renters who work in CBD or transition)
    4. Higher income ( owner occupied, specialized commercial)
    5. Suburbia
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3
Q

Axial Model

A
  • emphasizes importance of transportation
  • land in urban area that is well served by transportation facilities has a comparative advantage over land that is not
  • land will develop along transportation routes

DC

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4
Q

Sector Model

A
  • Affirms part of bid rent
  • has CBD but wedges that radiate outward
  • Wedges depend on distance from CBD and adjacent land use to guide land use
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5
Q

Multiple Nuclei Model

A
  • Certain activities require specialized facilities
  • many similar activities benefit from close proximity to one another
  • Certain dissimilar activities are detrimental to each other
  • Some activities must seek less desirable low price sites

Combo of axial and sector

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6
Q

What causes structures to decline in value?

A

Obsolescence

  1. Physical obsolescence
  2. Functional obsolescence
  3. Economic obsolescence
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7
Q

Physical Obsolesence

A
  • the building is falling apart
  • this causes the structure value to decline
  • happens over time
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8
Q

Functional obsolescence

A

The building no longer meets its audience’s needs well

Not a physical thing a preference and taste thing

Small closets

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9
Q

Economic Obsolescence

A

The current use is no longer the highest and beat use for the property

Usage value at HBU increases widening the gap between property value and usage value

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10
Q

The Neighborhood Lifecycle

A

Gestation, Youth and Maturity

Incipient Decline

Clear Decline

Accelerated Decline and Abandonment

Rejuvenation or Gentrification

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11
Q

The Neighborhood Lifecycle

Growth, Youth, and Maturity

A

Property values are rising

Residents’ incomes are rising

Turnover is low

New residents are economically and socially similar to those already present

Owner occupied

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12
Q

The Neighborhood Lifecycle

Incipient Decline

A

Those leaving the Neighborhood are replaced by less affluent families

“Filtering” occurs (houses get passed down to lower income families)

Prices decline

Causes - physical obsolescence, external changes, aging residents, construction of more desirable areas

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13
Q

The Neighborhood Lifecycle

Clear Decline

A

Housing has become sub standard (Owners make only minimal repairs)

Housing densities increase

Public services to support increased density are increasingly inadequate

Rents as opposed to owners

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14
Q

The Neighborhood Lifecycle

Accelerated Decline and Abandonment

A

Mass exodus by families with economic means to leave

Unemployment higher than average

Landlords cease making repairs and often abandon their buildings

Virtually abandoned at terminal stage

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15
Q

The Neighborhood Lifecycle

Rejuvenation or Gentrification

A

Land values have decreased so much that large segments of the Neighborhood can be bought up cheap and revitalized or rebuilt

Displacement of people who live there

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16
Q

Space Market

A

Transactions for the rights to use land and buildings

Suppliers - property owners who are willing to sell space to users

Demanders - people, firms, other entities that are willing to pay to use the space

17
Q

Asset Market

A

The market for he ownership of real estate assets

18
Q

What is an asset ?

A

A source of cash flows

19
Q

How are the space and asset market linked?

A

Through occupancy and rent in the space market and cash flows in the asset market

Increases in occupancy and rents leads to increases in cash flow from real estate assets which increases the value of real estate assets which incentivizes developers to add new inventory to the space market

The only way to balance the space market is through the asset and development markets

20
Q

How do supply and demand interact in the real estate market ?

A

Rents - price

Occupancy - quantity

21
Q

What info is most useful in predicting rent growth?

A

Current occupancy numbers

The relationship between current occupancy and long run average occupancy

The direction in which occupancy is moving (increasing or decreasing)

22
Q

Indicators of trouble in the real estate cycle

A

An increase in unsold inventory or vacancy (phase ll to phase lll)

Occupancy falls below the long run average (phase lll to phase lV)

Interest rates rise

23
Q

Locale

A

The place and all the things happening around the place

24
Q

Ricardo’s Law of Rent

A

Prices drive rent

25
Q

Pricing Power

A

Scarcity and productivity

If land is abundant landowners have little power

More scarce and productive land is the more people can charge for it

26
Q

What makes real estate so special ?

A 
Fixed location
Uniqueness 
Interdependence of land use 
Long life 
Long term commitment 
Large transactions
Long gestation period
27
Q

Usage value

A

The value the operator places on using the property

The amount of profit they attribute to the locals and structure provided by the property

28
Q

Highest and Best Use

A

The use of a parcel which will produce the highest return or price to the owner

The unique pairing of 1) a piece of land with 2) a building which perfectly capitalized on the land’s unique characteristics and therefor maximizes cash flows to the operator on the site

The more the operator makes the more the owner makes

Whatever you or a piece of land is uniquely good at relative to all other things you could be doing

29
Q

Comparative Advantage

A

What you are especially good at as a result of your unique characteristics

30
Q

What characteristics give locales comparative advantage ?

A 
Transportation facilities
Education facilities 
Created environment 
Natural resources 
Climate
Leadership
Labor force 
Laws and regulations

TECNCLLL
TECNCL^3

31
Q

Six stages of development

A

Feasibility and acquisition

Design

Financing

Construction

Marketing and leasing

Operations and management

32
Q

Stages of Pre Development Feasibility Analysis

A

Site

Market Analysis

Project and Product Design

Cost Analysis

Financial Analysis

33
Q

Demand Drivers For Residential Single Family (Owner Occupied)

A

Population

Household Formation (child rearing ages 30s and 40s)

Interest Rates (Mortgages)

Employment Growth (business and professional occupations as opposed to manufacturing jobs)

Lending Environment (can people get loans)

34
Q

Demand Drivers for Residential Multi Family (Apartments)

A

Population

Housing Formation (non child rearing 20s)

Local Housing Affordability ( how quickly can people move up the residential ladder, can kids move out of parents’ house)

Employment growth (service sectors)

35
Q

Demand Drivers for Retail

A

Aggregate disposable income

Aggregate household wealth (do people have houses they can borrow against?)

Traffic volume

Basically can people buy stuff

36
Q

Demand Drivers Office

A

Employment in office occupations (finance, insurance, legal)

Educational levels in the areas (will companies be here because of an educated workforce?)

37
Q

Demand Drivers Industrial (Warehouses)

A

Manufacturing employment

Transportation employment

Airfreight volume (do planes already come in and out of here, FedEx and Memphis)

Rail and truck volume (are there already built up rail yards and people who can drive trucks?)

38
Q

Demand Drivers for Hotel and Convention

A

Air Passenger Volume

Tourism Receipts or number of visitors

Principles Of Real Estate (2 decks)

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