Professional Documents
Culture Documents
Homeownership
Homeownership is not just shelter. It can
also be an investment vehicle.
Price Influences
Income and Employment
Interest Rates
Renting vs. Owning
Economic
Other Issues
7-2
Tax Considerations
Interest Deduction
Qualified residence
Maximum deduction
Points
Real Estate Taxes
Capital Gains Exclusion
$250,000 and $500,000
Primary residence rules and occurrence rules
7-3
Regional Dynamics
Speculative Housing Bubbles
Regional Economic Drivers
Growth or Decline?
Regional Dynamics
Base & Service Industries
Location Quotient
LQ>1 is a base industry
LQ<1 is a service industry
Employment Multiplier
7-5
Housing Supply
Housing Starts
Existing Home Sales
Local Supply Influences
Interest Rates
Zoning
Building Codes
Land Terrain
7-6
Housing Supply
Neighborhood Influences
Public goods
School quality
Capitalization Effect
Public services provided relative to taxes paid
7-7
Cost Approach
Subject Value Estimate =
Cost New Depreciation + Land Value
Physical depreciation, functional
obsolescence, external obsolescence
Depreciation is often estimated straightline
7-10
Income Approach
Gross Rent Multiplier (GRM)
Subject Value Estimate = GRM x Rental Income
7-11
7-12
7-13
7-14
7-15
Distressed Property
Below Market Value Property
Reasons:
Financial
Legal
Personal
7-16
Distressed Property
Financial Framework
Acquisition Phase
Holding Period Phase
Disposition Phase
Profitability
7-17
Distressed Property
Acquisition Phase
Information sources for distressed property
Legal Research: Title Quality
Auction Process
Lenders at auctions
Equitable Rights
Market research
Inspections
7-18
Distressed Property
Holding Period Phase
Financial Issues
Renovation cost
Interest or other carrying costs
Taxes and insurance
Disposition Phase
Selling
Renting
Occupying
7-19