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RES 431 (19)
Lecture 8

RES 431 Lecture 8: 8_RES 431 M001 Petrova 2-15-17

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Syracuse University
Real Estate
RES 431
Milena Petrova

RES 431 1232017 9:44:00 PM RES 431 M001 Petrova 21517 [email protected]du Value: The Central Idea Investment value: Maximum price an investor is willing to pay for ownerhip interest in real property or mortgages. Real Estate Valuation Estimate all future net cash flows Transaction value price you actually pay for the property Market value most likely price value to an average investor Cost of capital depending on that you are willing to pay more or less. Source of capital in finance: Equity Debt (is cheaper for developed markets) *today you would have to pay about 4 on a debt for building house Appraisal process of defining market value. 2 main decision rules in investment: NPV if its bigger than 0 IRR if its greater than r (hurdle rate minimum rate you want to achieve) NPV= Cost + PV of future cash flows (If NPV is positive I will take the project if negative than not) if making payment sign if receiving + sign
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