MGMT E2037 Real Estate Finance and Investment Fundamentals

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MGMT E-2037: Real Estate Finance and Investment Fundamentals Lecture 1: Why Study Real Estate Investment? Instructor: Teo Nicolais January 27, 2016 Lecture #1: Why Study Real Estate Investment? “Hey, now, you're an Entrepreneur get your game on, go play Hey, now, you're a Real Estate Investor get the show on get paid And all that glitters is gold Only shooting stars break the mold. ” -Smash Mouth on Studying Real Estate Investment January 26, 2016 Teo Nicolais mgmte 2037@dce. harvard. edu © 2015 Teo Nicolais

MGMT E-2037: Real Estate Finance and Investment Fundamentals Lecture 1: Why Study Real Estate Investment? Instructor: Teo Nicolais January 27, 2016 Introduction: 1. 2. 3. 4. Welcome! Why Study Real Estate Investment? Course Objectives Tips for Making the Most of This Course • Getting to Know Canvas • Getting to Know Your Classmates 5. Ways to Invest in Real Estate (Overview) • Direct Investment: Purchasing and Operating Properties • Indirect Investment: 6. What Distinguishes Real Estate Investment from Other Types of Investments? 7. Understanding the “Real Estate Game” (the “William Poorvu Framework”) 8. Macro-level Investment Decisions: What Investment Strategies are Right for You? 9. Micro-level Investment Decisions: How Do You Know if a Deal is Right for You? 10. The Centrality of Cash Flow in Real Estate Investment © 2015 Teo Nicolais

MGMT E-2037: Real Estate Finance and Investment Fundamentals Lecture 1: Why Study Real Estate Investment? Instructor: Teo Nicolais January 27, 2016 U. S. Capital Market Sectors: a $70 Trillion Pie. Real estate represents over 1/3 of the value of the investable capital assets in the US. © 2015 Teo Nicolais

MGMT E-2037: Real Estate Finance and Investment Fundamentals Lecture 1: Why Study Real Estate Investment? Instructor: Teo Nicolais January 27, 2016 Why Study Real Estate Investment? • Real Estate is the largest and most ubiquitous asset class in the world. • Investors of any size can participate. • Anyone can invest…. anywhere • Investment can be a lifelong pursuit: • You can be active when your schedule allows and passive when your time doesn’t allow. A single Real Estate investment provides a lens through which any type of business opportunity can be analyzed: • • Time value of money analysis Risk v. reward Raising capital through investors and lenders Operating a business © 2015 Teo Nicolais

MGMT E-2037: Real Estate Finance and Investment Fundamentals Lecture 1: Why Study Real Estate Investment? Instructor: Teo Nicolais January 27, 2016 Real Estate Projects Involve…. Arc hite De ctura sig n l ring ee Engin Project Management Demographics Fin anc e r me o t s Cu rvice Se nning Interior Design Pla Urban © 2015 Teo Nicolais

MGMT E-2037: Real Estate Finance and Investment Fundamentals Lecture 1: Why Study Real Estate Investment? Instructor: Teo Nicolais January 27, 2016 The Philosophy Driving This Course and It’s Teaching Staff: #Harvard. Real. Estate Annie Administrative TA Jeff Section TA Our Missions is to Make This the Best Class You’ve Ever Taken. (Seriously!) © 2015 Teo Nicolais

MGMT E-2037: Real Estate Finance and Investment Fundamentals Lecture 1: Why Study Real Estate Investment? Instructor: Teo Nicolais January 27, 2016 The Philosophy Driving This Course and It’s Teaching Staff: Theoretical Approach You Real Life Experience Approach © 2015 Teo Nicolais

MGMT E-2037: Real Estate Finance and Investment Fundamentals Lecture 1: Why Study Real Estate Investment? Instructor: Teo Nicolais January 27, 2016 The Philosophy Driving This Course and It’s Teaching Staff: This is a class about making investment decisions (through the lens of Real Estate. ) © 2015 Teo Nicolais

MGMT E-2037: Real Estate Finance and Investment Fundamentals Lecture 1: Why Study Real Estate Investment? Instructor: Teo Nicolais January 27, 2016 Why Does Carefully Managing Your Return Matter So Much? © 2015 Teo Nicolais

MGMT E-2037: Real Estate Finance and Investment Fundamentals Lecture 1: Why Study Real Estate Investment? Instructor: Teo Nicolais January 27, 2016 Objectives of This Couse By the end of this course, my goal is to help you… Build a framework for investment decision making through the lens of Real Estate Have a clear, intuitive understanding of the key financial and managerial concepts at play in the real estate world. Develop practical, marketable, skills in developing financial projections for all of the major real estate asset types (apartments, retail, office, and for-sale development) • Including tax implications and investor equity analysis Practice making investment decisions using tools of financial analysis. Understand the global real estate market and alternative financing options © 2015 Teo Nicolais

MGMT E-2037: Real Estate Finance and Investment Fundamentals Lecture 1: Why Study Real Estate Investment? Instructor: Teo Nicolais January 27, 2016 Tips for Making the most of this Course Ask questions. • “Who cares about this? ” • “Is that how it works in real life? ” Reflect on how the lessons we cover apply to your market and career. Get to know your classmates…. © 2015 Teo Nicolais

MGMT E-2037: Real Estate Finance and Investment Fundamentals Lecture 1: Why Study Real Estate Investment? Instructor: Teo Nicolais January 27, 2016 Connect with Your Classmates on Facebook (Optional)… Facebook Group for MGMT E-2035 & MGMT E-2037: https: //www. facebook. com/groups/908121689231849/ © 2015 Teo Nicolais

MGMT E-2037: Real Estate Finance and Investment Fundamentals Lecture 1: Why Study Real Estate Investment? Instructor: Teo Nicolais January 27, 2016 Connect with Your Classmates on Facebook (Optional)… Facebook Group for a Student Group You Definitely Need to Check Out: https: //www. facebook. com/heerea? fref=ts © 2015 Teo Nicolais

MGMT E-2037: Real Estate Finance and Investment Fundamentals Lecture 1: Why Study Real Estate Investment? Instructor: Teo Nicolais January 27, 2016 Follow and Share Real Estate News with the World on Twitter (Optional)… #Harvard. Real. Estate © 2015 Teo Nicolais

MGMT E-2037: Real Estate Finance and Investment Fundamentals Lecture 1: Why Study Real Estate Investment? Instructor: Teo Nicolais January 27, 2016 http: //www. extension. harvard. edu/inside-extension/6 -tips-start-your-extension-semester-right © 2015 Teo Nicolais

MGMT E-2037: Real Estate Finance and Investment Fundamentals Lecture 1: Why Study Real Estate Investment? Instructor: Teo Nicolais January 27, 2016 Getting to Know the Course Textbooks: Optional, but Strongly Recommended. Earlier Editions are Totally Ok. © 2015 Teo Nicolais

MGMT E-2037: Real Estate Finance and Investment Fundamentals Lecture 1: Why Study Real Estate Investment? Instructor: Teo Nicolais January 27, 2016 Is MGMT E-2035: Principles of Real Estate Required for this course? No, but it is strongly, strongly encouraged. You will accrue significantly higher returns on your investment of time and capital by taking MGMT E-2035. Many of the skills taught in MGMT E-2035 are expanded here. If you have not taken MGMT E-2035, e-mail Annie (annie. the. ta@gmail. com) and she will provide you with useful information for succeeding in this course. © 2015 Teo Nicolais

MGMT E-2037: Real Estate Finance and Investment Fundamentals Lecture 1: Why Study Real Estate Investment? Instructor: Teo Nicolais January 27, 2016 Ways to Invest in Real Estate (Overview) • Direct Investment: Purchasing and Operating Properties • Indirect Investment • Syndications • Multi-property Funds • Real Estate Investment Trusts © 2015 Teo Nicolais

MGMT E-2037: Real Estate Finance and Investment Fundamentals Lecture 1: Why Study Real Estate Investment? Instructor: Teo Nicolais January 27, 2016 How Do You Decide Whether a Deal is Right For You? • • • What are your goals and values? How much time you have? What personal experiences can you bring to bear on a project? How much money do you have available to put up? How much money can you afford to lose? What is your risk profile? What is your investment timeline horizon? Does the project involve construction or extensive remodeling? If so, do you have the time experience needed to supervise the job? Other Key Questions: • Is this investment style right for me? • Is this life right for me? © 2015 Teo Nicolais