Chapter 17 Real Estate Investments

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New Jersey Real Estate for Salespersons and Brokers

By Marcia Darvin SpadaThomson/South-Western

Copyright, 2006

Chapter 17 Real Estate Investments

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Chapter 17

Real Estate Investments

Chapter 17 Real Estate Investments

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Chapter 17 Key Terms

Corporation

Leasehold mortgage

Leverage

Participation

mortgage

Partnership/general

partnership/limited

partnership

Proforma statement

Rate of return

Time value of money

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Special Financing

Lifeinsurancecompanies

Refinancingversusselling

Participationmortgage

Leaseholdmortgage

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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 ___ = $25,000Factor missing: divide and

convert decimal to percentage

$25,000 ÷ $175,000 = _____

Answer: 7% (rounded for 6 mos; 14% (rounded) for the year

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Investment Analysis

Time value of money

Holdings periodplanning

LeverageAvailablefinancing

Proforma schedule

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Types of OwnershipAdvantages Disadvantages

Sole

proprietorship All profits to ownerTax advantage to owner

Lack of continuityUnlimited personal liability

Partnership Broader managementEase of formationLow start-up costs

Difficult to find partnersDivision of authority

Corporation Limited liabilityLegal entity

Charter restrictionsDouble tax except S

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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

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Property Type Selection

Apartmentrentals

Mixeddevelopment

Hotels/motels

Land

Investmentproperties