Chapter 2 Risk, Return, and Decision Making 4 Characteristics of RE Investments Speculation vs. Investment No Clear Distinction Uniqueness of Real Estate.

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Presentation transcript:

Chapter 2 Risk, Return, and Decision Making 4 Characteristics of RE Investments Speculation vs. Investment No Clear Distinction Uniqueness of Real Estate as an Investment Rental Income Appreciation Financial Leverage Control Security The Relationship between Risk and Return

Chapter 2 Risk, Return, and Decision Making 4 Investor Objectives Choice of Investor Objectives Goal of Wealth Maximization 4 The Concept of Market Efficiency

Chapter 2 Risk, Return, and Decision Making 4 What is a Good Investment? Can We Measure a Good Investment? Net Present Value of Equity Internal Rate of Return on Equity The Equity Valuation Model Why the Equity Valuation Model Works

Chapter 3 Real Estate Investment Mathematics 4 Compound Interest Tables Present Value Factors Mortgage Constant Proportion of Mortgage Outstanding Compound Interest Functions

Chapter 3 Real Estate Investment Mathematics 4 How to Calculate Future Value Future Value of a Present Amount Future Value of a Lump Sum Future Value of a Regular Annuity Calculating a Regular Payment to Earn a Specified Amount

Chapter 3 Real Estate Investment Mathematics 4 How to Calculate Present Value Present Value of a Future Amount Present Value of a Lump Sum Rate of Return - Simple IRR Present Value of Unequal Series

Chapter 3 Real Estate Investment Mathematics 4 How to Find Net Present Value Present Value of an Investment 4 How to Calculate the Rate of Return Rate of Return on Investment - IRR

Chapter 3 Real Estate Investment Mathematics 4 The Mechanics of Mortgages The Mortgage Constant Calculating Payments on a Monthly Mortgage Determining the Outstanding Balance (Monthly Payments) Calculating Amortization Schedule (Monthly Payments)