Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)
7th Edition
ISBN: 9780357033609
Author: Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher: Cengage Learning
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Question
Chapter 13, Problem 10FPE
a)
Summary Introduction
To discuss: Whether Person X likes to invest in real estate or to invest in REIT.
b)
Summary Introduction
To discuss: If Person X decides to invest directly will he invest in speculative property or income-producing property.
c)
Summary Introduction
To discuss: The non-financial and financial goals before starting the research for the appropriate property.
d)
Summary Introduction
To discuss: The types of securities Person X can buy if he decides to invest in real estate.
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How do you measure returns to real estate investments?
When considering the time value of money in making an investment decision, an investor would purchase a property when:
I. Present Value < purchase price
II. IRR (Internal Rate of Return) < discount rate (investor’s required return)
A: I only
B: II only
C: both I and II
D: neither I nor II
How do you measure returns to real estate investments? explain in 4 paragraphs
Chapter 13 Solutions
Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)
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- You are considering investing in real estate—both for the short-term cash flows and the potential long-term capital gains—and are evaluating both a commercial lease property (such as a strip shopping center or an office building) and a residential rental property (such as several rental houses or a small apartment complex). It is likely that you will invest in only one of these properties at this time. The general data regarding these investments is as follows: propertytype price mortage rental income (per year) depreciationexpense (per year) Estimatedresalevalue small office $800,000 $448,000 $136,016 $7,692 $912,000 rental homes $650,000 $292,500 $91,281 $8,273 $685,100 The first potential investment consists of an office building with ten offices, which has a current market price of $800,000. Of this amount, $200,000 represents the cost of the land, and the balance, $600,000, is attributable to buildings on the property. The second possible investment, which…arrow_forwardWhat is a real estate investment trust? Explain the difference between public and private REITs. How is performance measured for REITs? Choose three common investment ratios in real estate. Explain what the ratio measures and why an investor might consider the ratio. What is the difference between unlevered and levered cash flows? What discount rate must be applied when using unlevered cash flows versus levered cash flows? What is lease assignment? What is subletting? Explain at least one main difference between these methods.arrow_forwardwhat are at least two main ways to invest in real estate indirectly?arrow_forward
- When measuring the investment performance of something as broadly defined as real estate, What one must keep many things in mind?arrow_forwardwhat are direct and indirect investments in real estate?arrow_forwardWhat are the advantages/disadvantages of real estate as alternative investments?arrow_forward
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