1) "The productive elements of real estate depend on the voids, not the solids." 2) Real estate is the SPACE - the enclosure that shelter activities
The Meaning of Real estate
1) physical asset 2) right from owning property 3) profession and an industry
Real Estate Physical asset
- The land and all the permanent attachment to the land - Tangible versus intangible - Improvements on the land, improvements to the land - Real Property versus personal property
Real Estate - Ownership rights
Owning real estate give you certain rights: bundle of rights - right to use/occupy/enter it - right to sell it - right to lease it - right to give it away - right to do all or none of these things
bundle of rights
- Fee simple interest: implies absolute ownership - Leased fee and leasehold estates: when a property is leased, the right to use/occupy is transferred to the tenant. The landlord has leased fee interest, and the tenant has a leasehold interest.
Real Estate markets and participants
- Users market: user = owner/renters, suppliers = developers, builders..etc - Capital markets: Real estate as alternative investment - Government: zoning, buildings codes, property taxes...etc.
Real Estate Markets - Characteristics
- Localized markets because heterogeneous, immoblie, segmented - markets hardly ever in balance - incomplete market information - high value asset - long economic life - high transaction cost - traditions
- non monetary benefits: buying a house or having headquarters - monetary benefits: annual income (NOI) and proceeds from sale - incremental decisions
- Decisions to invest $ today is based on expectations in future - Some RE investments are more risky than others (hotels, restaurants)
Real Estate Risk
- costly to enter and exit market (time and money) - RE is illiquid - can't sell quickly (may have fewer buyers) - uncertainty of cost (renovation, land dev) - uncertainty of value (future demand - SP, rents) - more risk lowers value of property (higher return/yield required)
Investment value vs appraisal
- Investment value: value to you, based on your expectations - Appraisal if often for "market value": most probable selling price, typical buyer and seller
Nature of property rights
- When we purchase property, really purchasing the rights of owning real estate - Rights: claims or demands that our gov't is obligated to enforce - Right to give real estate value include: the right to prevent otehres from using our property without permission, the right to use the property ourselves, the right to dispose of it as we wish
Real vs Personal Property
- Real Property: rights in land and its permanent structure - Personal Property: All other property, personal and household goods, intellectual property, music
Real property that formerly was personal property (refrigerator, microwave..etc.)
can't sell property post death, lose property when die
- Easement: the right to use land for a specific and limited purpose - Restrictive covenants: Covenants that impose restrictions on land use; created at conveyance of land to a new owner - liens: an interest in property as security for an obligation
Easements: non-possessory interest
- appurentant: a right to use that a (dominant) parcel of land over an adjacent (servient parcel) ...ex: driveways - Easements typically "run with the land" the rights and obligations are inseparable from parcel involved.
Easement in gross (commercial easement)
there is a servient parcel, but no dominant parcel.
a grant of permission, not a real estate interest
Restrictive covenants (deed restrictions)
- covenants that impose restrictions on land use; created at conveyance f land to a new owner - two methods from creation 1) restriction in a deed conveying a single parcel of land to a new owner 2) Restrictions impose on a entire subdivision at its creation
An interest in property as security for obligation (usually a debt)
arise from events unrelated to the property
Arise from ownership and use of the property
Residence shared by multiple owners
Tenancy in common
the default form of ownership, if no further direction is given, an undivided share of the whole
An undivided shre of teh whole, plus "survivorship' rights
Tenancy by entity
joint tenancy for husband and wife
sole ownership of unit and tenancy in common ownership of "common elements"
personal property (shares in a corportaion and the rights they convey) deemed to be RE
a system of co-ownership for married couples in a minority of states
owning property for a specific time
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