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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

Chapter 1

Overview of Real Estate Finance


Chapter 1 learning objectives

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


What is finance

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


What is real estate finance

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


The environment of real estate finance

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


Financial intermediaries

1-5

Financial Intermediaries

  • Commercial Banks

  • Thrift Institutions

  • Insurance Companies

  • Pension Funds

  • Investment Companies