Real estate Finance Exam 2 Questions & Answers 100% verified

Investment Value - ANSWER-Maximum price an investor is willing to pay for ownership (or debt) interest in real property. Real estate valuation - ANSWER-Estimate all future net cash flows Convert into estimate of present value. How are investment decisions made? - ANSWER-By comparing estimate of present value to required equity investment The Value of a property (or mortgage) depends on - ANSWER-Magnitude: of expected cash flows Timing: of expected cash flows Riskiness: of expected cash flows Effect of Timing on Value - ANSWER--We CAN'T just simply add the sum of future cash flows to find their value. Risk - ANSWER-Possibility that actual outcomes will vary What are examples of risk in real estate? - ANSWER-Building component or system failure -Economic downturn -Tenant destruction of property -Natural disasters -Environment contamination Valuation Requires the Use of Time Value of Money Operations: What are the two types of operations - ANSWER--Compounding Operations -Discounting Operations