1. SINGLE FAMILY HOUSING: PRICING, INVESTMENTS, AND TAX INVESTMENTS OBJECTIVES Analysis of Investment Property Tax and Depreciation Effects Appraisals Income Approach Cost Approach Market Approach (Sales Comparison)

2. Demand - Single Family House Prices Population Growth Household formations Employment Household Income Interest Rates Federal Income Tax Policy Cost of Renting

3. Interest deductions –Primary residence –Second residence Maximum interest deductions –Acquisition debt- $1,000,000 –Home equity debt- $100,000 Points on mortgage loans Real Estate taxes Capital gain exclusion Tax Treatment of Personal Residence

4. Advantages of Renting Flexibility Lack of down payment Credit quality of resident Risks of ownership Maintenance “Bubbles” in house price

5. Pricing Property: Appraisals Market or sales comparison approach Cost approach Income approach

6. Sales Comparison Approach Adjustments for: – Time – Location – View – Design appeal – Quality of construction – Age

7. Sales Comparison Approach Continued Adjustments continued: – Condition – Size – Quality of interior – Functional utility – Type and condition of systems, i.e., HVAC – Sale or financing concessions

8. Cost Approach Value of land plus estimate of improvements Depreciation – Physical depreciation – Functional obsolescence – External obsolescence – Curable v.s. incurable

9. Income Approach Gross rent multiplier Difficult to use for single family residential properties