1. Chapter 17 Real Estate Investments1 New Jersey Real Estate for Salespersons and Brokers By Marcia Darvin Spada Thomson/South-Western Copyright, 2006

2. Chapter 17 Real Estate Investments2 Chapter 17 Real Estate Investments

3. Chapter 17 Real Estate Investments3 Chapter 17 Key Terms  Corporation  Leasehold mortgage  Leverage  Participation mortgage  Partnership/general partnership/limited partnership  Proforma statement  Rate of return  Time value of money

4. Chapter 17 Real Estate Investments4 Special Financing Life insurance companies Refinancing versus selling Participation mortgage Leasehold mortgage

5. Chapter 17 Real Estate Investments5 Rate of Return $ Rate of Return Percentage of income that the investor gets back on an investment Tom buys an income property for $175,000. He sells it 6 mos. later for $200,000. What is his percentage of return? Investment x percentage of return = dollars in profit $175,000 X ___ = $25,000 Factor missing: divide and convert decimal to percentage $25,000 ÷ $175,000 = _____ Answer: 7% (rounded for 6 mos; 14% (rounded) for the year

6. Chapter 17 Real Estate Investments6 Investment Analysis Time value of money Holdings period planning Leverage Available financing Proforma schedule

7. Chapter 17 Real Estate Investments7 Types of Ownership AdvantagesDisadvantages Sole proprietorship All profits to owner Tax advantage to owner Lack of continuity Unlimited personal liability PartnershipBroader management Ease of formation Low start-up costs Difficult to find partners Division of authority CorporationLimited liability Legal entity Charter restrictions Double tax except S

8. Chapter 17 Real Estate Investments8 Securities Securities and Exchange Commission (SEC) registration  Public offerings  Registration and prospectus  NJ Bureau of Securities Exempt from SEC registration  Private offerings-use of accredited investors  Small offerings –not exceeding $1 million in a 12- month period

9. Chapter 17 Real Estate Investments9 Property Type Selection Investment properties Land Hotels/ motels Mixed development Apartment rentals