Exam 1 Results
| Mean | 86.7 |
| Standard Error | 1.2 |
| Median | 86.0 |
| Mode | 94.0 |
| Standard Deviation | 8.1 |
| Sample Variance | 65.1 |
| Kurtosis | -0.9 |
| Skewness | -0.2 |
| Range | 28.0 |
| Minimum | 72.0 |
| Maximum | 100.0 |
| Sum | 3814.0 |
| Count | 44.0 |
Category: f18-econ325
Review for Exam 1
Review:
- Business and Culture in China
- Informational Meeting on Thu, Sep 27 from 3:30 to 5:30p in HSB 108
- $200 discount available for early registration
- Consider enrolling in Geography of World Economy (ECON 320)
- ROI Pro Forma Analysis
- Exam 1 on Thu
- Bring 1-page property analysis to exam
Presentation:
- Review topics for Exam 1
- How to buy a single family home
- Save for down payment
- Loan pre-approval
- Property search, MLS
- Offer, Negotiation, Under Contract
- Earnest Money
- Inspection
- Appraisal
- Title, Escrow, Closing
- Mortgage 101
- Down payment (20%)
- Fixed vs ARM
- Interest rate
- Amortization schedule
- Property Taxes
- Hazard Insurance
- PMI
- Comparable Sales Analysis
- Single Family Valuation
- Identify “comps”
- Price per SqFt
- Adjustments to account for key differences
- ROI Pro Forma Analysis
- How to buy a single family home
Assignment:
- Prepare 1-page property analysis
- Study for Exam 1
Lesson 5: Pro Forma ROI Analysis (Part 2 of 2)
Review:
- Pro Forma ROI Analysis Part 1
- Exam 1 on Thu Sep 13
Presentation:
- The story of 235 E Adams
- Purchased from Freddie Mac (foreclosure) in May 2012
- Paid $32,900
- Paid less than half estimated value (my estimate)
- Why? Banks wouldn’t loan on the property
- How? I offered cash
- Can you do it too? Probably not right now; 2010-2012 was a once in a generation opportunity
- Remodel/repair
- Removed exterior stairs
- Converted from Duplex back to Single Family
- Cleaned, painted, etc
- Rented for $700/month, eventually up to $875/month
- Last tenant had to be evicted, left a mess
- I decided to sell (getting sick of being a landlord) and “carry the note” (seller financing)
- Sold for $110,000
- $10k down payment
- $100k loan @ 8.9% interest
- My buyer sold over the summer
- Carried note for over a year
- Payoff amount was higher than original loan amount (due to missed/late payments).
- I like Owner Financing
- Purchased from Freddie Mac (foreclosure) in May 2012
Assignment:
- Complete Pro Forma ROI Analysis Worksheet with your target property.
- Estimate 4-year ROI.
Lesson 4: Pro Forma ROI Analysis (Part 1 of 2)
Review:
- Comparable Sales Analysis
- Exam 1 on Thu, Sep 13
- Valuation and ROI Analysis 1-page (yes, ONLY 1 page) paper due at time of exam
Presentation:
- Complete Comparable Sales Analysis
- Pro Forma ROI Analysis
- ROI worksheet
- Begin with Valuation – what’s the property worth?
- Estimate rental income – fair market rent?
- Estimate expenses
- Property taxes
- Insurance
- Maintenance
- Repairs
- Management
- Utilities
- Use an amortization schedule
- Calculate interest payments
- Calculate principal payments
- Estimate tax benefits
- Depreciation
- Tax shelter
- Tax savings
- Make assumptions
- Appreciation of property value
- Rent appreciation
- Expense inflation
- Estimate ROI
- Total
- Annualized
Assignment:
- Complete a “first draft” ROI worksheet for your selected property
Lesson 3: Residential Real Estate Valuation
Review:
- Mortgage 101
- Attendance
- Gary Miller and Casey Edwards visiting on Oct 23.
Presentation:
- Comparable Sales (aka “comps”)
- Find similar properties recently sold (typically 3)
- location, size, construction style/materials, etc
- Calculate price per square foot
- Apply price per square foot to your property
- Adjust for key valuation drivers
- Identify key value differences (e.g., 2-car garage, solar panels, swimming pool, etc), if any
- Estimate valuation difference and +/- value
- Find similar properties recently sold (typically 3)
- Estimate value of a property listed for sale
- run through a few examples
- Zillow, County Assessor, MLS
- Sample Realtor’s MLS driven Comparable Sales Analysis (pdf)
Activity:
- Comparable sales analysis exercise
- Identify target property
- Identify 3+ comparable properties, recently sold
- Calculate Price per SqFt for each comparable property
- Identify differences between each comparable and the target property (e.g., additional bathroom, finished basement, 3-car garage, etc)
- Make price adjustments (e.g., +$10k, -$5k) to compensate for differences
- Calculate an estimated fair market value sales price for target property
Assignment:
- Watch Determining Property Values (YouTube)
Lesson 2: Mortgage 101
Review:
- How to Buy Real Estate
- Attendance
- Properties identified
Presentation:
- Historical Mortgage Rates
- Mortgage 101 – video series at realtor.com
- Basics
- Rates
- Credit Rating
- Down Payment
Closing Process- Home Loans
- Mortgage Process
- Mortgage Types
- Fixed vs ARM
- 10, 15, 20, 30 – which amortization?
- 1, 3, 5, 7, 10 – which initial time period (before ARM rate adjusts)?
Activity:
- Calculate monthly mortgage payments for your selected Pueblo County property
- Assume 20% down payment
- Use current mortgage rates published by Freddie Mac
- Calculate monthly payments for 3 loan types
- 30-year fixed
- 15-year fixed
- 5/1 ARM
Assignment:
- What do you think your selected property is worth?
- Is the asking price fair?
Lesson 1: How to Buy Real Estate
Review:
- Syllabus
- Why Real Estate
- Attendance
Presentation:
- Buying a Home
- Save $$ for a down payment
- Need 20% unless you qualify for special programs (e.g. VA or first time buyer)
- FHA loans can allow you to purchase a home with as little as 3.5% down
- Build credit…but don’t obsess over credit scores
- Learn about mortgage loan options
- Fixed rate
- ARM
- Amortization schedule
- PMI = private mortgage insurance
- Get Pre-Approved for a loan
- Mortgage brokers
- Banks
- Credit Unions
- Find an agent
- Buyer vs Seller agency
- Conflicts of interest
- FSBO = For Sale By Owner
- Search for homes in your budget
- Property Types
- Single Family (SF) home
- Condo, Townhouse – don’t forget HOA fees
- Duplex, Triplex, Fourplex
- Search
- MLS = multiple listing service
- Zillow, Trulia
- Realtor.com
- Local agencies
- Property Types
- Make an offer
- Begin Negotiation
- Beware emotional attachment – be prepared to walk away
- Enter into a contract to purchase real estate (Under Contract)
- Disclosures
- Terms
- Personal Property
- Pay Earnest Money
- Conduct due diligence
- Inspection
- Appraisal
- Secure a home loan, lock in mortgage terms
- Arrange property hazard insurance coverage
- Confirm final closing costs
- Title Insurance
- Property Taxes
- Loan origination fees
- Other fees or negotiated terms
- Prepare to wire or obtain certified funds for the purchase and payment of closing costs
- Wire funds to Escrow (Title Company)
- Schedule the Closing (usually takes place at a Title Company)
- Close the deal (aka sign your life away) and take possession of the property
- Start making mortgage payments and budgeting for maintenance expenses
- Save $$ for a down payment
- How to calculate costs
- Down payment – 20%
- If under 20% you will have to pay PMI or take out a 2nd mortgage
- Principal and Interest payments – Loan Calculator
- Property Taxes – Pueblo County Records
- Hazard Insurance
- Obtain quotes from insurers
- For a rough ballpark estimate use 0.35% of purchase price (price * 0.0035)
- Down payment – 20%
Assignment:
- Search for and identify one (1) property currently listed For Sale in Pueblo County
- The property should be one you might actually consider buying as an investment or residence
- Note asking price and use for for calculations
- Calculate down payment
- Calculate monthly principal and interest payments
- Look up property taxes
- Estimate total monthly mortgage payment
Introduction to Real Estate
Presentation:
- Attendance
- Course Overview
- Enrollment and Presentations
- Guest Speakers
- Syllabus (PDF): F18 ECON 325 Syllabus
Blackboard- Survey
Why Study Real Estate?
- Build Individual Wealth
- Build Corporate Wealth
- Impact on the Economy
- Urbanization
- Inflation
- Civil Rights and Fair Housing
- Demographics
- Energy
- Tax Policy