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Chapter 1

Chapter 1. Overview of Real Estate Finance. 1-1. Chapter 1 Learning Objectives. Understand the relationship between finance and real estate Understand how financial markets work Learn which major financial institutions direct the flow of funds. 1-2. What is Finance?.

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Chapter 1

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  1. Chapter 1 Overview of Real Estate Finance

  2. 1-1 Chapter 1 Learning Objectives • Understand the relationship between finance and real estate • Understand how financial markets work • Learn which major financial institutions direct the flow of funds

  3. 1-2 What is Finance? • The study of the process, institutions, markets, and instruments used to transfer money and credit between individuals, businesses, and governments • The focus is on • maximizing value • time value of money • cash flow

  4. 1-3 What is Real Estate Finance? • The study of • The effect of financing on the value of real property • The valuation of mortgages • The financing of residential and commercial real estate • The changes in tax laws affecting real estate financing • The primary and secondary mortgage markets • The securitization of mortgages

  5. 1-4 The Environment of Real Estate Finance • Institutions create financial instruments to transfer money and credit related to real property transactions • Financial institutions channel funds from surplus income units to deficit income units

  6. 1-5 Financial Intermediaries • Commercial Banks • Thrift Institutions • Insurance Companies • Pension Funds • Investment Companies

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