Sunday, September 21, 2014

First 'Student Society of Real Estate' meeting of semester

 

When: Wednesday, September 24, 2014
Time: 5:00PM – 5:45PM
Where: PB 023 Conference Room (Peters Business Building)

Who: All students who are interested in Real Estate, Construction Management, Finance, Entrepreneurial and other related industries

Topics: Networking opportunities at upcoming Gazarian Real Estate Center events, real estate industry classes and internships, getting acquainted with other like-minded real estate students.

Come join us and enjoy refreshments and good fellowship!

Look forward to seeing you Wednesday,

Diane Ray
President, Student Society of Real Estate





 
 

Tuesday, May 6, 2014

Last SSRE meeting of the semester!



When: Wednesday, May 7, 2014

Time: 5:00PM – 5:45PM
Where: PB 012 (Peters Business Building)

Who: All students who are interested in Real Estate, Construction Management, Entrepreneurial and other related industries
Topics:  Voting in new Vice President and Treasurer, upcoming real estate luncheons and seminars, real estate classes and internships, Dog Days and other outreach opportunities.

Come join us and enjoy pizza and sodas!

Look forward to seeing you Wednesday,
Diane Ray

President, Student Society of Real Estate

Wednesday, April 9, 2014

Blog Post #2


Real Property and Easemants
by: Rudy Serrato

When you purchase property someone would assume that you completely own what ever is above or under the property.  But the reality is that you receive a bundle of rights that allows you to have individual rights in real property.  In the bundle of rights there are non-public restrictions on real property rights.  This is known to be an encumbrance, which is a restriction on the free simple estate interest. 

In Texas thousands of landowners filed a class action lawsuit against three of the largest communication companies in the United States.  The landowners from Texas are pursuing a settlement based on the fact that the communication companies did not have the right to an easement on their property.  The three companies installed fiber-optic cable-networks in the Texas properties without the landowners consent. In other words, the landowners are disputing the fact that these companies did not have the right to use their property in a specified manner other than to benefit the communication companies.  
   
   
            The Texas landowners have brought of pervious decisions made by the United States courts.  As brought fourth as a benchmark this landmark case that was brought to the United States Supreme Court in Marvin M. Brandt Revocable Trust, et al. v. United States.  In this case the basis defined the limits on permitted uses of railroad right of way easements.    

            Chief Justice John G. Roberts, Jr. delivered the opinion of the 8-1 majority stating, “When an easement is abandoned, the easement disappears and the land reverts to its previous owner, so in this case, the land would revert to the Brandt Revocable Trust and property owners.”  The landowners in this case believed that they first gave the easement to the United States and not the railroad, so if the United State abandoned the easement property in question the railroad company has no right to go through their property.   

            The Texas landowners have a long way to go in fact it is an uphill battle with regards to a Supreme Court decision.  This is a good example of the right in question to bundle of rights there are a few such as surface rights, air rights, and subsurface rights.  When purchasing property is wise to do your do diligence and finding everything that has to do with the property.


Fin 180 Blog Post 2

 Residential Development: The Precommitment Phase
 By: John Gligich

With the recent and ongoing turnaround of the Fresno real estate market, residential land development is once again becoming a prosperous endeavor. Recently, there has been a lack of finished home lots on the market. This is leading local home builders to buy up large amounts of raw land with the goal of creating residential space. This, along with other positive statistics for the Fresno residential real estate market, are all contributing to a healthier environment for builders in the Central Valley (Harvey). Residential land development can be extremely lucrative, especially in current conditions, but extensive planning is crucial to the success of a residential development. The precommitment phase of real estate development in particular is especially important for developers when choosing whether or not to develop residential space.
The precommitment phase has three vital steps that must all be carried out to the fullest in order to ensure a successful development. These stages are also necessary to make a decision on if the project will even be feasible or not. The three stages are as follows: Stage 1, conceive a development project, stage 2, examine the feasibility of the project, and stage 3, refine the concept. These three stages must be performed exceptionally if the development is going to succeed. During the precommitment phase the developers risk is relatively low and no extreme commitment has been made. This allows the developer to examine their options in order to make the best investment decision possible (Diaz 203).
The first stage is to conceive a development project. This includes defining the type of project, determining a site, and gathering other valuable information regarding the investment and the proposed site. For residential construction, the “Use in Search of a Site” method is the best method for determining a site, because the developer already has the project defined as a residential development, so finding a site for that use is necessary (Diaz 203).  In his article, Developing Real Estate: How to Price Land for Profit, Craig Grella discusses the proper methods to employ when choosing as viable site.  Grella writes that finding the future value of a proposed site is the first step in evaluating a site. For residential development, using comps, not only in size and style, but also in age, is a good way to determine the potential value of the property you plan on developing (Grella). Once a site has been selected the developer should perform further research on the site. This research can be done inexpensively through planning and development departments and public records (cite book). Once preliminary research has been completed the developer can proceed to stage 2, examine the feasibility of the project.
Stage 2 brings the vast majority of the research in order for developers to make a sound decision on their potential investment. During this stage the developer must determine the market feasibility of the project, and perform final research on the site regarding suitability and potential legal issues. The developer can do this by performing a market analysis and feasibility study, and performing due diligence. It is good for developers to analyze the local demand for residential space, the relative supply of residential space in the area, and to survey the competitive space located in the area the proposed site is located. After completing a market analysis, the developer performs due diligence on the specific site proposed. By researching legal issues that may arise, zoning issues, physical issues, and environmental issues, developers can hope to weed out bad investments while there is still a relatively low amount of commitment. Ample information is readily available once again through public records and planning and development departments (Diaz 205).  Once sufficient due diligence has been performed, the developer can further refine their development concept.
The final step in the precommitment phase of development requires the developer to further refine their idea and gain a more solid understanding of the commitment that will be required if the developer chooses to proceed with the project into the post-commitment phase. The final stage focuses on further refinement of the concept, including the type of residential space, the quality of the space, the price range, and the potential customers. By performing marketing studies on the local public, the developer can gain insight into the needs of the community. This will assist in determining the specifics of the proposed residential. Once the product is further refined the next step would be to create a pro forma. A good pro forma will further help the developer determine the financial feasibility of their investment (Diaz 208). Grella suggests determining the development costs, which include permits, fees, and construction costs. After the development cost are solidified, the developer now knows how much he or she must pay for land based on the future value they expect to obtain from the development. This is known as the residual land value. After determining the residual land value, expected profits are then figured into the equation (Grella).
Once the three stages listed above are carefully completed, the developer can determine whether or not to move on to the post commitment phase and proceed with the project. If the precommitment phase is done properly and thoroughly, the post commitment phase will be a success, limiting the developer’s risk, and increasing their chance of success.















Works Cited
Diaz, Julian, and J. Andrew. Hansz. "Project Precommitment." Real Estate Analysis:
            Environments and Activities. Dubuque, IA: Kendall Hunt Pub., 2010. 202-10. Print.
Grella, Craig. "Developing Real Estate: How to Price Land for Profit." The BiggerPockets Blog
            RSS. N.p., 2 Oct. 2009. Web. 09 Apr. 2014.
Harvey, Chuck. "Developers Scramble for Bare Land to Build Houses." The Business Journal.
            N.p., 17 Mar. 2014. Web. 09 Apr. 2014.

Fin180 Blog Post 2 Investment project


Jacob Balfanz
1.     The listing price for a 20.81 acre piece of land is $975,000 and the development improvements are $2,279,256.
2.     The land is divided into 78 lots.
3.     The builder estimates the development to be completed equally over three years (26 houses per year).
4.     Operating Expenses are $144,011.76 per home and are expected to rise 2% every year.
5.     Credit loss is 5%.
6.     The homes sell for $230,833.33.
7.     Housing prices are estimated to appreciate at 3% a year.
8.     The lender is quoting a loan to value ratio of 70% for a 30 year loan with monthly payments and a 7% interest rate
9.     An amortization schedule indicates that the principal repayment for the loan will be $23,139.94, $24,812.72, and $26,606.44. The annual debt service is $15,155.45*12.
10. Brokerage Commissions are 3%.
11. Income tax rate is 51.6%. Capital gains tax is 20%
12. Investor requires a 15% rate of return
BTCF
 Year 1   Year 2   Year 3 
Potential Growth   $6,001,666.58  $6,181,716.58  $6,367,168.07
Less Credit loss  $300,083.33  $309,085.83  $318,358.40
EGI  $5,701,583.25  $5,872,630.75  $6,048,809.67
Less OE  $3,744,305.76  $3,819,191.88  $3,895,575.71
     
NOI  $1,957,277.49  $2,053,438.87  $2,153,233.96
Less ADS  $181,865.40  $181,865.40  $181,865.40
     
BTCF  $1,775,412.09  $1,871,573.47  $1,971,368.56
Taxable Income
 Year1   Year2   Year3 
NOI  $1,957,277.49  $2,053,438.87  $2,153,233.96
Less interest  $158,725.46  $157,052.68  $155,258.96
Taxable income  $1,798,552.03  $1,896,386.19  $1,997,975.00
ATCF
 Year1   Year2   Year3 
BTCF  $1,775,412.09  $1,871,573.47  $1,971,368.56
Tax impact  $928,052.85  $978,535.28  $1,030,955.10
ATCF  $847,359.24  $893,038.20  $940,413.46
BTER
Future Sale Price  $18,550,551.23
Less Selling Costs  $556,516.54
NPS  $17,994,034.70
Less Loan Balance  $440,930.82
BTER  $17,553,103.88
Capital Gains Tax
NPS  $17,994,034.70
Less Orig Basis  $3,254,256.00
Total Capital Gain  $14,739,778.70
DCF
Year1 Year2 Year3
ATCF  $847,359.24  $893,038.20  $940,413.46
BTER  $17,553,103.88
Less Capital Gains Tax  $2,947,955.74
Annual Benefits  $847,359.24  $893,038.20  $15,545,561.60
PV factor 0.869565217 0.756143667 0.657516232
PV annual benefits  $736,834.12  $675,265.18  $10,221,459.09
Total Benefits  $11,633,558.39
Decision
PV: Total benefits  $11,633,558.39
Less initial equity  $976,276.80
NPV  $10,657,281.59
Normally a development and construction loan occurs rather than an amoratized loan so now we will see the difference.
The loan is based on the appraised amount of each lot. An appriasal is done to find each lot is valued at about $50,000.
Interest Expense is estimated at about $10,000  per lot
BTCF  Year 1   Year 2   Year 3 
PGI  $6,001,666.58  $6,181,716.58  $6,367,168.07
Less OE  $3,744,305.76  $3,819,191.88  $3,895,575.71
NOI/BTCF  $2,257,360.82  $2,362,524.70  $2,471,592.36
Taxable Income
 Year1   Year2   Year3 
NOI  $2,257,360.82  $2,362,524.70  $2,471,592.36
Less interest  $260,000.00  $260,000.00  $260,000.00
Taxable income  $1,997,360.82  $2,102,524.70  $2,211,592.36
ATCF
 Year1   Year2   Year3 
BTCF  $2,257,360.82  $2,362,524.70  $2,471,592.36
Tax impact  $1,030,638.18  $1,084,902.75  $1,141,181.66
ATCF  $1,226,722.64  $1,277,621.96  $1,330,410.70
BTER
Future Sale Price  $18,550,551.23
Less Selling Costs  $556,516.54
NPS/BTER  $17,994,034.70
Capital Gains Tax
NPS  $17,994,034.70
Less Orig Basis  $3,254,256.00
Total Capital Gain  $14,739,778.70
DCF
Year1 Year2 Year3
ATCF  $1,226,722.64  $1,277,621.96  $1,330,410.70
BTER  $17,994,034.70
Less Capital Gains Tax  $2,947,955.74
Annual Benefits  $1,226,722.64  $1,277,621.96  $16,376,489.66
PV factor 0.869565217 0.756143667 0.657516232
PV annual benefits  $1,066,715.34  $966,065.75  $10,767,807.78
Total Benefits  $12,800,588.87
Decision
PV: Total benefits  $12,800,588.87
Less initial equity  $976,276.80
NPV  $11,824,312.07
This investment would be very profitable because it has a very high net present value