Investment Analysis for Real Estate Decisions (5 HAR/CDR)

Investment Analysis for Real Estate Decisions (5 HAR/CDR)

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  • 製本 Hardcover:ハードカバー版/ページ数 489 p.
  • 言語 ENG,ENG
  • 商品コード 9780793136605
  • DDC分類 332.6324

Table of Contents

Preface to the Fifth Edition                       xx
PART ONE Basic Issues in Real Estate
Investment Analysis
The Real Estate Investment Decision 2 (20)
State of the Investment Analysis Art 3 (1)
Real Estate as an Investment 4 (1)
Passive and Active Investors 4 (1)
Investment in Equity and Debt 4 (1)
Who Are the Investors? 5 (2)
Institutional Investors 5 (1)
Foreign Participation in U.S. Real 6 (1)
Estate Markets
Real Estate Investment Performance 7 (1)
Concepts and Definitions 8 (1)
Estimating Investment Value: An Overview 9 (9)
Steps in the Investment Decision Model 11 (1)
Valuing the Benefit Stream 12 (4)
Investor Objectives and Risk 16 (2)
Summary 18 (1)
Notes 19 (1)
Recommended Reading 20 (1)
Review Questions 21 (1)
Discussion Questions 21 (1)
Investment Strategy and the Concept of 22 (20)
Market Efficiency
Supply, Demand, and The Price of Real 23 (8)
Estate Assets
Demand for Real Estate Assets 23 (4)
The Supply Element 27 (2)
The Market for Real Estate Assets 29 (2)
Market Efficiency and Profit Opportunities 31 (5)
Defining the Market 32 (1)
Market Structures 33 (2)
Price Searchers and Market Efficiency 35 (1)
Sources of Inefficiency 36 (1)
Strategy Implications 36 (3)
Summary 39 (1)
Notes 40 (1)
Recommended Reading 40 (1)
Review Questions 40 (1)
Discussion Questions 41 (1)
Land Utilization and the Rental Value of 42 (16)
Real Estate
Economic Factors in Land-Use Decisions 43 (4)
Systematic Development Patterns 44 (1)
Business Location Decisions 45 (2)
Bid-Rent Curves and ``Natural'' Zoning 47 (2)
Linkages and Transfer Costs 47 (1)
Linkages and Location of Industry 47 (2)
Commercial Location Decisions 49 (1)
The Market for Rental Space 49 (2)
Market Adjustments 50 (1)
Market Structure and the Need for Market 51 (1)
Research
Summary 52 (1)
Notes 52 (1)
Recommended Reading 53 (1)
Review Questions 53 (1)
Discussion Questions 54 (1)
Part One: Case Problems 55 (3)
PART TWO Market Research and Cash-Flow
Forecasting
Market Research Tools and Techniques 58 (24)
The Need for Market Research 59 (1)
Market Research for Portfolio Decisions 59 (1)
Market Research for Better Property 59 (1)
Management
How Much Market Research? 60 (2)
The Role of Prevailing Market Conditions 60 (1)
The Role of Complexity 61 (1)
The Cost-Benefit Trade-Off 61 (1)
Avoiding Analysis Paralysis 61 (1)
A Design for Market Research 62 (4)
Problem Formulation 63 (1)
Data Collection and Analysis 63 (1)
A Four-Quadrant Forecasting Matrix 64 (2)
Preparing the Research Report 66 (1)
Data Sources 66 (3)
Secondary Data 66 (3)
Primary Data 69 (1)
Descriptive Research 69 (2)
Planning for Descriptive Research 70 (1)
Cross-Sectional and Time Series Data 70 (1)
Inferential Analysis 70 (1)
Geographic Information Systems 71 (4)
Summary 75 (1)
Notes 76 (1)
Recommended Reading 76 (1)
Review Questions 77 (1)
Discussion Questions 77 (5)
Appendix 4.A: Data Sources 78 (4)
Reconstructing the Operating History 82 (14)
Overview of the Operating Statement 83 (1)
Estimating Ability to Command Rent 84 (5)
Collect Data from the Subject Property 84 (1)
Compare with Peer-Group Properties 84 (3)
Identifying Peer Properties within the 87 (2)
Market Area
Estimating Operating Expenses 89 (1)
An Apartment Building Example 89 (5)
Reconstructing Effective Gross Income 89 (3)
Reconstructing Current Operating 92 (2)
Expenses
Revised Operating Statement 94 (1)
From Reconstruction to Forecast 94 (1)
Summary 94 (1)
Notes 94 (1)
Recommended Reading 95 (1)
Review Questions 95 (1)
Discussion Questions 95 (1)
Forecasting Income and Property Value 96 (18)
Forecasting Gross Income 97 (3)
The Influence of Physical 97 (1)
Characteristics
The Influence of Locational 98 (1)
Characteristics
Analyzing Linkages and Transfer Costs 98 (1)
Analyzing Neighborhood Environmental 99 (1)
Factors
The Supply Factor 100(1)
Forecasting Operating Expenses 100(1)
The Net Operating Income Forecast 101(3)
Estimating Future Market Value 104(2)
Additional Information Needed 106(1)
Summary 107(1)
Recommended Reading 108(1)
Review Questions 108(1)
Discussion Questions 109(5)
Part Two: Case Problems 110(4)
PART THREE Using Borrowed Money
Financial Leverage and Investment Analysis 114(16)
Why Leverage Is So Popular 115(3)
Working the Spread 115(2)
Amplifying the Tax Shelter 117(1)
Amplifying the Gain on Disposal 117(1)
Measuring Financial Leverage 118(1)
How Much Is Enough Financial Leverage? 119(4)
Debt Coverage Ratios and Available 119(1)
Financing
Loan-to-Value Ratios and Available 120(1)
Financing
Financial Leverage and Risk 121(1)
Financial Leverage and the Cost of 122(1)
Borrowing
Who Are the Lenders? 123(2)
Commercial Banks 124(1)
Insurance Companies and Pension Funds 124(1)
Conduit Sources 125(1)
Summary 125(1)
Note 126(1)
Recommended Reading 126(1)
Review Questions 126(1)
Discussion Questions 127(1)
Problems 127(3)
Credit Instruments and Borrowing 130(12)
Arrangements
Credit and Security Instruments 131(2)
Promissory Notes 131(1)
Mortgages 132(1)
Deeds of Trust 133(1)
Credit Terms 133(2)
Amortization Alternatives 134(1)
Alternative Interest Rate Provisions 134(1)
Alternative Financing Arrangements 135(2)
Installment Sales Contracts 135(1)
Sales and Leasebacks 136(1)
Junior Mortgages 136(1)
Government-Sponsored Credit Arrangements 137(1)
Department of Housing and Urban 137(1)
Development
Private Activity Bonds 137(1)
Redevelopment Bonds 138(1)
Summary 138(1)
Notes 139(1)
Recommended Reading 139(1)
Review Questions 139(1)
Discussion Questions 140(2)
The Cost of Borrowed Money 142(22)
The Many Faces of Interest Expense 143(6)
Nominal and Effective Rates 143(4)
Before-Tax and After-Tax Borrowing Cost 147(1)
Nominal and Real Rates 148(1)
Comparing Financing Alternatives 149(5)
Comparing Effective Interest Rates 150(1)
Which Nominal Rate Applies 151(1)
Wraparound Mortgages 152(2)
Incorporating Borrowing into the 154(3)
Operating Projection
Debt Coverage Ratio Constraint 154(1)
Loan-to-Value Ratio Constraint 155(1)
Anticipated Loan Amount 155(1)
Before-Tax Cash Flow from Maegen's 155(2)
Magic Manor
Debt Amortization Schedule for Maegen's 157(1)
Magic Manor
Summary 157(1)
Recommended Reading 158(1)
Review Questions 158(1)
Discussion Questions 158(1)
Problems 159(5)
Part Three: Case Problems 161(3)
PART FOUR Income Tax Considerations
Basic Income Tax Issues 164(22)
The Nature and Significance of the Tax 165(1)
Basis
The Initial Tax Basis 165(1)
Allocating the Initial Tax Basis 165(3)
Adjusting the Basis for Cost Recovery 168(3)
Allowable Cost Recovery Periods 168(1)
Computing the Allowance 168(1)
A Depreciation Schedule for Maegen's 169(2)
Magic Manor
Other Adjustments to the Tax Basis 171(1)
Forecasting After-Tax Cash Flows 172(1)
Tax Consequences of Ownership Form 173(4)
Title May Vest in Owners as Individuals 174(1)
Title May Vest in a Corporation 175(1)
Tax Option Corporations 176(1)
Investors May Form a General Partnership 176(1)
A Limited Partnership May Hold Title 176(1)
Limited Liability Companies 177(1)
Tax Consequences of Financial Leverage 177(1)
Prepaid Interest Must Be Amortized 177(1)
Construction-Period Interest Must Be 178(1)
Capitalized
Limits on the Deductibility of Interest 178(1)
Investment Strategy Implications 178(1)
Income Tax Credits for Property 178(1)
Rehabilitation
How Tax Credits Work 178(1)
Limitations on the Deductibility of Losses 179(1)
Limited Partners' Income and Expense Is 179(1)
Always Passive
Real Estate Rental Income and Expense 180(1)
Is Sometimes Passive
An Exception for Small-Scale Operators 180(1)
Taxation of Foreign Investors 181(1)
The Alternative Minimum Tax 181(1)
Tax Consequences of Property Sales 182(1)
Summary 182(1)
Recommended Reading 183(1)
Review Questions 183(1)
Discussion Questions 184(1)
Problems 184(2)
Tax Consequences of Property Disposal 186(20)
Computing the Realized Gain or Loss 187(1)
Tax Treatment of Realized Gains or Losses 187(4)
Gains Treated as Ordinary Income 187(3)
When Capital Gain or Loss Rules Apply 190(1)
Why the Difference is Important 190(1)
Computing Net Capital Gains or Losses 190(1)
Estimating Cash Flow from Selling 191(2)
Maegen's Magic Manor
When Realized Gains or Losses Are 193(1)
Recognized
Using the Installment Sales Method 193(3)
Advantages of Installment Sales 193(1)
Reporting
What Gain Qualifies 193(1)
The Contract Price 194(1)
The Recognized Gain 195(1)
The Imputed Interest Problem 196(1)
The Outstanding Indebtedness Problem 196(1)
Like-Kind Exchanges 196(3)
Exchange versus Sale and Purchase 197(1)
Purpose for Which Property Is Held 198(1)
What Is Like-Kind Property? 198(1)
Tax Consequence of Like-Kind Exchanges 198(1)
Giving Property Away 199(2)
The Unified Gift and Estate Tax 199(1)
Effect of Giving Property Subject to a 200(1)
Mortgage
The Tax Basis of Property Received as a 200(1)
Gift
A Gifting Strategy for Highly 200(1)
Appreciated Property
Alternatives May Be Less Taxing 200(1)
Summary 201(1)
Note 201(1)
Recommended Reading 201(1)
Review Questions 202(1)
Discussion Questions 202(1)
Problem 202(4)
Part Four: Case Problems 203(3)
PART FIVE Measuring Investment Performance
Traditional Measures of Investment Worth 206(12)
Ratio Analysis 207(3)
Income Multipliers 207(2)
Financial Ratios 209(1)
Traditional Profitability Measures 210(4)
Overall Capitalization Rate 210(1)
Equity Dividend Rate 210(2)
Broker's Rate of Return 212(1)
Payback Period 213(1)
Toward More Rational Analysis 214(1)
Time-Adjusted Return Measures 214(1)
Summary 215(1)
Recommended Reading 215(1)
Review Questions 215(2)
Discussion Questions 217(1)
Discounted Cash-Flow Analysis 218(14)
Present Value 219(1)
Net Present Value 220(1)
Internal Rate of Return 221(5)
Problems with the Internal Rate of 222(4)
Return
Comparison of Net Present Value and 226(1)
Internal Rate of Return
Shoring Up the Internal Rate of Return 227(2)
Modified Internal Rate of Return 227(1)
Adjusted Rate of Return 228(1)
Financial Management Rate of Return 229(1)
Summary 229(1)
Notes 229(1)
Recommended Reading 230(1)
Review Questions 230(1)
Discussion Questions 231(1)
Investment Goals and Decision Criteria 232(20)
Choosing a Discount Rate 233(2)
Summation Technique 233(1)
Risk-Adjusted Discount Rate 234(1)
Marginal Cost of Capital 234(1)
Opportunity Cost of Capital 235(1)
Investment Decisions and Decision Rules 235(3)
Comparing Projects of Different Size 236(1)
Choosing among Mutually Exclusive 236(1)
Opportunities
Mutually Dependent Investment Decisions 237(1)
Investment Value and Investment Strategy 238(1)
Applying the Discounted Cash-Flow 239(6)
Technique
Estimating Investment Value 243(2)
Summary 245(1)
Notes 245(1)
Recommended Reading 246(1)
Review Questions 246(1)
Discussion Questions 247(5)
Part Five: Case Problems 248(4)
PART SIX The Risk Element
Risk in Real Estate Investment 252(16)
Major Risk Elements 253(5)
Financial Risk 253(4)
Insurable Risk 257(1)
Business Risk 258(1)
Controlling Risk 258(4)
Reducing Risk Through Judicious 258(2)
Investment Selection
Diversification as a Risk Management 260(1)
Tool
Market Research as a Risk Control Tool 261(1)
Property Management to Control Risk 261(1)
Shifting Risk to Tenants 261(1)
Hedging to Control Risk 261(1)
Risk Preferences and Profit Expectations 262(2)
Degrees of Risk Aversion 263(1)
Rational Risk Taking 264(1)
Measuring Risk 264(1)
Summary 264(1)
Recommended Reading 265(1)
Review Questions 265(1)
Discussion Questions 265(3)
Traditional Risk-Adjustment Methods 268(14)
The Payback-Period Approach 269(1)
Risk-Adjusted Discount Rate 269(3)
The Risk-Free Discount Rate 270(1)
The Risk Premium 270(1)
Practical and Theoretical Problems 271(1)
The Certainty-Equivalent Technique 272(1)
Partitioning Present Values 272(3)
Sensitivity Analysis 275(4)
Summary 279(1)
Notes 280(1)
Recommended Reading 280(1)
Review Questions 280(1)
Discussion Questions 281(1)
Contemporary Risk Measures 282(24)
Probability as a Risk Measure 283(5)
Risk Differs from Uncertainty 284(1)
Estimating Probabilities 284(2)
Conventional Probability Rules 286(1)
Application of Joint Probabilities 287(1)
Interpreting Risk Measures 288(6)
Probability Distributions 288(1)
Expected Value 289(1)
Measuring Dispersion 290(4)
Standard Deviation and the Discounted 294(1)
Cash-Flow Model
Mean/Standard Deviation Approach 295(1)
Establishing Acceptable Risk Profiles 296(3)
Dealing with More Complex Cash-Flow 299(1)
Patterns
Perfectly Correlated Cash Flows 300(1)
Uncorrelated Cash Flows 301(2)
Partially Correlated Cash Flows 303(1)
Summary 304(1)
Notes 305(1)
Recommended Reading 305(1)
Review Questions 305(1)
Discussion Questions 305(1)
Risk Management in a Portfolio Context 306(12)
Modern Portfolio Theory and Risk 307(3)
Management
Systematic and Unsystematic Risk 307(1)
The Efficient Frontier 308(2)
Real Estate's Role in the Efficient 310(2)
Portfolio
Real Estate Diversification Strategies 312(1)
Geographic Diversification 312(1)
Summary 313(1)
Notes 313(1)
Recommended Reading 314(1)
Review Questions 314(1)
Discussion Questions 314(4)
Part Six: Case Problem 315(3)
PART SEVEN The Investment Analysis Process
Illustrated
Investment Feasibility Analysis 318(16)
The Nature of the Feasibility Question 319(3)
Relationship to Investment Analysis 319(1)
Feasibility Analysis and Valuation 320(1)
Analysis
Dimensions of the Feasibility Question 320(1)
The Primacy of the Objective 320(1)
The Significance of Limitations 321(1)
Steps in the Feasibility Analysis Process 322(1)
Preliminary Financial Feasibility 322(7)
Regulatory Authorities 323(1)
Lender Objectives 323(1)
Equity Investors' Objectives 323(1)
Solvency Testing---The Equity 323(4)
Investor's Perspective
Solvency Testing---The Lender's 327(2)
Perspective
Format for a Feasibility Report 329(2)
Summary 331(1)
Notes 332(1)
Recommended Reading 332(1)
Review Questions 332(1)
Discussion Questions 333(1)
Analyzing Subdivision Proposals 334(14)
Overview of the Subdivision Process 335(2)
Significance of Location Decisions 336(1)
Coping with Regulatory Requirements 336(1)
Creating the Subdivision Plan 336(1)
Financing the Project 337(1)
Industrial Subdivision: A Case Study 337(8)
Site Characteristics 337(1)
Market Research 338(2)
Investment Analysis 340(5)
Summary 345(1)
Recommended Reading 345(1)
Review Questions 345(1)
Discussion Questions 346(2)
Development and Rehabilitation 348(18)
Overview of Development 349(3)
Feasibility Analysis 350(1)
Financing Real Estate Development 350(1)
The Construction Phase 351(1)
A Development Case Study 352(4)
Financing Arrangements 352(2)
Project Cost Estimates 354(1)
Estimated Net Operating Income 354(1)
Sales Price 355(1)
Developer's Profit 355(1)
Rehabilitation 356(2)
Incentives for Rehabilitation 357(1)
Judging Feasibility of Rehabilitation 358(1)
Proposals
Commercial Rehabilitation: A Case Study 358(4)
Financing 359(1)
Cost Recovery (Depreciation) Allowances 360(1)
Calculating Annual After-Tax Cash Flows 360(1)
Estimating The Selling Price 360(1)
Estimating Income Tax and Cash Proceeds 361(1)
From Sale
Evaluating Expected After-Tax Cash Flows 362(1)
Summary 362(1)
Recommended Reading 363(1)
Review Questions 364(1)
Discussion Questions 364(2)
Industrial Property, Office Building, and 366(28)
Shopping Center Analysis
Investing in Industrial Buildings 367(2)
Demand for Industrial Space 367(1)
Locational Factors 368(1)
Types of Industrial Buildings 368(1)
An Industrial Building Case Study 369(5)
Forecasting Income and Expenses 370(1)
Financing 370(1)
Annual Income Tax Consequences 370(1)
Forecasting Sales Proceeds 371(2)
Evaluating After-Tax Cash Flows 373(1)
Investing in Office Buildings 374(1)
An Office Building Case Study 374(5)
Reconstructing the Income and Expense 375(1)
Statement
Financing 375(1)
Depreciation Allowance 375(1)
Forecasting Annual After-Cash Flows 375(2)
Forecasting After-Tax Cash Flow from 377(1)
Disposal
Analyzing After-Tax Cash-Flow Forecasts 378(1)
Investing in Shopping Centers 379(2)
Neighborhood Shopping Centers 380(1)
Community Shopping Centers 381(1)
Regional Shopping Centers 381(1)
Superregional Malls 381(1)
Lifestyle Centers 381(1)
A Shopping Center Case Study 382(7)
Financing 382(1)
Depreciation Schedule 382(1)
Forecasting Income 383(1)
Forecasting Annual Cash Flows and 384(1)
Taxable Income
Estimating Taxable Income and Cash 384(2)
Proceeds From Sale
Evaluating After-Tax Cash Flows 386(3)
Summary 389(1)
Note 389(1)
Recommended Reading 389(1)
Review Questions 389(1)
Discussion Questions 390(4)
Part Seven: Case Problems 391(3)
PART EIGHT Real Estate as a Security
Real Estate Investment Trusts 394(13)
REIT Regulation 395(1)
Tax-Exempt Status 395(1)
Shareholder Rights 396(1)
Trustees and Directors 396(1)
REIT Management 396(1)
Advisor Responsibilities 396(1)
Advisor Compensation 397(1)
REIT Assets 397(1)
REITs as Investment Vehicles 397(5)
Income Tax Consequences 398(1)
Diversification and Liquidity 398(2)
Professional Guidance 400(1)
Investment Risk 400(1)
An Additional Layer of Risk 400(2)
REIT Mutual Funds 402(1)
How REITs Are Evaluated 402(1)
Sources of REIT Information 402(1)
Summary 403(1)
Notes 404(1)
Recommended Reading 404(1)
Review Questions 404(1)
Discussion Questions 405(2)
Part Eight: Case Problems 406(1)
Appendix A Mathematics of Compounding and 407(21)
Discounting
Conceptual Basis for Compounding and 407(1)
Discounting
How Money Placed on Deposit Will Grow 408(3)
Present Value of a Future Amount 411(2)
How a Series of Deposits Will Grow 413(1)
Present Value of an Annuity 414(4)
Present Value of a Perpetual Annuity 418(1)
Payments to Amortize a Loan 419(2)
Extending the Usefulness of Financial 421(7)
Tables
Finding Values Not in the Tables 421(1)
Remaining Balance of a Note 421(2)
Present Value of a Deferred Annuity 423(3)
Annuities in Advance 426(2)
Appendix B Compounding and Discounting with 428(7)
Financial Calculators
Future Value of a Dollar 428(2)
Compound Value of an Annuity 430(1)
Present Value of a Dollar 431(1)
Present Value of a Level Annuity 432(1)
Amount to Amortize $1 (Mortgage Constant) 433(1)
Recommended Reading 434(1)
Appendix C Financial Tables 435(11)
Appendix D Normal Distribution Table 446(1)
Appendix E A Closer Look at Like-Kind 447(13)
Exchanges
Tax Consequences 447(3)
Not all Parties Need Qualify 447(1)
Effect of Receiving Unlike Property 448(2)
Treatment of Transaction Costs 450(1)
Tax Basis of Acquired Property 450(4)
Effect of Losses in Section 1031 Exchanges 454(2)
Allocating the Substitute Basis 456(1)
Nonsimultaneous Exchanges 457(1)
Exchanges Between Related Parties 458(1)
Note 458(1)
Review Questions 458(1)
Problems 458(2)
Glossary 460(23)
Index 483