Proforma: Feasibility Analysis
Function
Multi-year Cash Flow Projection
Multi-year Return Projections
Deal Structuring (Equity/Debt)
Tax treatment and Planning
Holding period analysis
Sensitivity Analysis
Portfolio Planning
Project Monitoring and Benchmarking
Developers want to know what performance fee they can get, generally they want about 15%.
development and disposition agreements
TOD is really a version of DDA because there is a partnership between the developer and transit organization
Discounted Cash Flow
IRR (internal rate of return)
discount rate = hurdle
NPV
Thursday, November 13, 2008
Tuesday, September 30, 2008
Class notes/September 30
Underwriting
Borrower Credit Worthiness
Borrower NOI
Asset Value
Credit is cheap and underwriters focus only on future asset values (in this case, real estate). The next level, the rating agents, should have looked and seen the standards falling and corrected them.
By amortizing fixed rate mortgage for $100,000, 5% anual rate
PMT formula = monthly rate!!!
1970s we started allocating adjustable rate mortgages
lenders didn't want to make a 5% interest rate commitment for 30 years. they stopped making loans and negotiated adjustable loans to borrowers. the risk is more evenly split between borrower and lenders in this model. ARMs are a little more complicated and there are a few more terms.
Life-time Cap: Maximum interest rate that the loan can take.
Periodic Cap/Adjustment limit: max annual or monthly cap the mortgage can adjust to (i.e. 1%)
Index: What the mortgage interest rate is keyed to (these are money market rates that are international) (e.g. federal funds rate (federal reserve rate charge + 3% from bank, nist stavke), 6 month treasury bill (most volatile), 11th district cost of funds, libor (rate quoted in london that is quickly becoming the international rate)
teaser rate: initial rate that is different than your qualifying rate
Amortization rate calculations differ in two ways:
First you need to forecast the interest rate
Recompute the monthly interest rate based on the annual balance in column D.
After finding the value of all of those payments over the life of the loan, (NPV(rate,the whole payment column)
NPV allows you to see which one is a better loan over its term http://www.investopedia.com/terms/p/presentvalue.asp.
The shortest loan you can afford is the best loan
The lowest rate is better
A bigger loan is better when asset values are rising but not preferable when asset values are falling.
If you don't have any money then lower down payment is best.
If you are income strained you go for the lowest monthly payment.
Risk adverse
If you are a homebuyer and you expect to make no other deductions, you can care less about interest rate but care more about rate (you can claim the interest on your taxes).
Affordable home buyer/developer-->biggest loan and lowest payment
Private debt is from
Public: mutual funds, public backed securities, etc. it is held by private companies, commercial mortgage backed securities,
Equity-private investors and REITs
debt- savings and loans, mortgage backed security.
Look at Chapter 7 in text
Borrower Credit Worthiness
Borrower NOI
Asset Value
Credit is cheap and underwriters focus only on future asset values (in this case, real estate). The next level, the rating agents, should have looked and seen the standards falling and corrected them.
By amortizing fixed rate mortgage for $100,000, 5% anual rate
PMT formula = monthly rate!!!
1970s we started allocating adjustable rate mortgages
lenders didn't want to make a 5% interest rate commitment for 30 years. they stopped making loans and negotiated adjustable loans to borrowers. the risk is more evenly split between borrower and lenders in this model. ARMs are a little more complicated and there are a few more terms.
Life-time Cap: Maximum interest rate that the loan can take.
Periodic Cap/Adjustment limit: max annual or monthly cap the mortgage can adjust to (i.e. 1%)
Index: What the mortgage interest rate is keyed to (these are money market rates that are international) (e.g. federal funds rate (federal reserve rate charge + 3% from bank, nist stavke), 6 month treasury bill (most volatile), 11th district cost of funds, libor (rate quoted in london that is quickly becoming the international rate)
teaser rate: initial rate that is different than your qualifying rate
Amortization rate calculations differ in two ways:
First you need to forecast the interest rate
Recompute the monthly interest rate based on the annual balance in column D.
After finding the value of all of those payments over the life of the loan, (NPV(rate,the whole payment column)
NPV allows you to see which one is a better loan over its term http://www.investopedia.com/terms/p/presentvalue.asp.
The shortest loan you can afford is the best loan
The lowest rate is better
A bigger loan is better when asset values are rising but not preferable when asset values are falling.
If you don't have any money then lower down payment is best.
If you are income strained you go for the lowest monthly payment.
Risk adverse
If you are a homebuyer and you expect to make no other deductions, you can care less about interest rate but care more about rate (you can claim the interest on your taxes).
Affordable home buyer/developer-->biggest loan and lowest payment
Private debt is from
Public: mutual funds, public backed securities, etc. it is held by private companies, commercial mortgage backed securities,
Equity-private investors and REITs
debt- savings and loans, mortgage backed security.
Look at Chapter 7 in text
Thursday, September 25, 2008
Chapter 13, Summary from Meg
Chapter 13
The Role of the Public Sector
- Any real estate development has the government playing a role
- The chapter examines the roles of governments as they affect the development process and the development industry as a regulator of private development and as a provider of needed public infrastructure and facilities.
The Public Sector as a Regulator
- Public and private interactions in any development increase in frequency as the proposed projects are subjected to criticism during the approval process leading to the stages of final permits
The Local Regulatory Process
- A comprehensive plan describes the desirable ways in which a community should develop over ten-twenty year time frame.
- Zoning ordinances are the most widely used form of land us regulation. They establish a variety of districts, depicted on maps, and spell out requirements and standards for permitted uses of land and buildings, the height and size of buildings, the size of lots and yards around buildings, the supply of parking spaces, the size and type of signs and fences, and other matters in each district.
- Subdivision regulations provide public control over subdivision land into lots for sale and development. They contain requirements and standards regarding the size and shape of lots, the design of construction of streets, water and sewer lines, and other public facilities, and other concerns such as protecting environmental features.
- Capital improvements programs are adopted by local governments to provide a construction schedule for planned infrastructure improvements, they also identity the expected sources of funds to pay for the improvements.
- A popular regulatory technique that goes beyond traditional planning and zoning is the use of requirements for adequate public facilities.
- Zoning changes may also require changes to the comprehensive plans
- Most public officials believe that involving their constituencies in these procedures will lead to wider consensus on new plans and regulations and therefore less opposition to implementing them.
- As a result, public officials use goal-setting exercises to describe future directions and qualities of growth based on projected trends and understanding of desired community qualities.
State Regulatory Actions
-Although state governments delegate most regulation of land use and development to local governments, states have always exercised some control over development.
-In growth management states, once a local plan has been reviewed or approved by a state agency and the community has adjusted its zoning and other regulations to the plan, development approvals and permits proceed in a traditional manner.
Public/Private Roles in Planning and Financing Infrastructure
-Providing infrastructure for community development is viewed as a primary government function. Many facility systems, such as roads and sewer lines must be closely related. Some public facilities and services such as school should be made available to all. Also, governments frequently expand infrastructure systems to support economic development in the community and the region.
Sources of Public and Capital Funds
-Local governments obtain capital for infrastructure improvements from their annual budgets, from the issuance of municipal bonds, and from state and federal funding programs.
- For long-term investments, governments depend on funds derived from obligation bonds or revenue bonds
Impact Fees and Exactions
- Impact fees are also known as systems development charges or development impact fees
- Impact fees are part of the developer contribution called “exactions”, that require developers to contribute to the provision of public facilities in their development.
- Sometimes exactions and fees are specified in regulations
- Other times exactions and fees are negotiated by jurisdictions with developers depending on their contribution
Legal Constraints, equity concerns, and administrative concerns… these are all basically judged on a case-by-case basis.
?s ask Meg
The Role of the Public Sector
- Any real estate development has the government playing a role
- The chapter examines the roles of governments as they affect the development process and the development industry as a regulator of private development and as a provider of needed public infrastructure and facilities.
The Public Sector as a Regulator
- Public and private interactions in any development increase in frequency as the proposed projects are subjected to criticism during the approval process leading to the stages of final permits
The Local Regulatory Process
- A comprehensive plan describes the desirable ways in which a community should develop over ten-twenty year time frame.
- Zoning ordinances are the most widely used form of land us regulation. They establish a variety of districts, depicted on maps, and spell out requirements and standards for permitted uses of land and buildings, the height and size of buildings, the size of lots and yards around buildings, the supply of parking spaces, the size and type of signs and fences, and other matters in each district.
- Subdivision regulations provide public control over subdivision land into lots for sale and development. They contain requirements and standards regarding the size and shape of lots, the design of construction of streets, water and sewer lines, and other public facilities, and other concerns such as protecting environmental features.
- Capital improvements programs are adopted by local governments to provide a construction schedule for planned infrastructure improvements, they also identity the expected sources of funds to pay for the improvements.
- A popular regulatory technique that goes beyond traditional planning and zoning is the use of requirements for adequate public facilities.
- Zoning changes may also require changes to the comprehensive plans
- Most public officials believe that involving their constituencies in these procedures will lead to wider consensus on new plans and regulations and therefore less opposition to implementing them.
- As a result, public officials use goal-setting exercises to describe future directions and qualities of growth based on projected trends and understanding of desired community qualities.
State Regulatory Actions
-Although state governments delegate most regulation of land use and development to local governments, states have always exercised some control over development.
-In growth management states, once a local plan has been reviewed or approved by a state agency and the community has adjusted its zoning and other regulations to the plan, development approvals and permits proceed in a traditional manner.
Public/Private Roles in Planning and Financing Infrastructure
-Providing infrastructure for community development is viewed as a primary government function. Many facility systems, such as roads and sewer lines must be closely related. Some public facilities and services such as school should be made available to all. Also, governments frequently expand infrastructure systems to support economic development in the community and the region.
Sources of Public and Capital Funds
-Local governments obtain capital for infrastructure improvements from their annual budgets, from the issuance of municipal bonds, and from state and federal funding programs.
- For long-term investments, governments depend on funds derived from obligation bonds or revenue bonds
Impact Fees and Exactions
- Impact fees are also known as systems development charges or development impact fees
- Impact fees are part of the developer contribution called “exactions”, that require developers to contribute to the provision of public facilities in their development.
- Sometimes exactions and fees are specified in regulations
- Other times exactions and fees are negotiated by jurisdictions with developers depending on their contribution
Legal Constraints, equity concerns, and administrative concerns… these are all basically judged on a case-by-case basis.
?s ask Meg
Tuesday, September 23, 2008
Notes September 23
Assume the value is whatever it costs us
Possibilities for a NOI that is too high:
Expenses are too high
Our rents aren't high enough
Our expenses are too high
Our density is too low
Okay, so there is a gap. How do we close it?
Try to close the gap:
Fine the supportable Mortgage
NOI/(Debt Coverage Ratio x Mortgage Constant)
Mortgage Constant: Yearly debt service for a dollar's worth of loan
Ellwood Tables: series of numbers that list all possibilities of interest rates and mortgage terms and mortgage constants.
Yearly Debt Service = (Loan x MC)
+ my affective loan to cost ratio is super low
_________________________________
don't do it, lady.
start fiddling around with the costs.
negotiate a lower land cost
negotiate a lower construction cost
raise the rent
raise density (remember that this increases construction cost)
2 things to remember
when does density help?
when you are building apartment buildings and your land cost is below 15-20$/sqft, density rarely helps (it is cheaper to buy more land than to make a denser building).
good designer/good architect can design higher densities, keep the cost under control, and make the density seem low a.k.a. elegant density). always remember your client or you will have a building and no tenants.
Check out what a lower interest rate would do and lower parking spaces--> it would lower the MC which would get you a bigger loan
that's not really realistic
so check out your expense rate since you are in control of this.
hold on to the land for a year or two and wait and see if the interest rates go down.
always use current cap rates--> no one can predict
relationship between cap rate and the rent (chapter 7 explains)
---------------------------------------------------------------------------------------
Financing
make payments for five years but the interest and the principle are geared to a 20 year period.
lenders like short terms and long amortization periods because the lender is protected from interest rate risk. adjustable rate mortgages are also good for banks.
difference between market value and outstanding value]
the bank will look at your past record when you go to get a loan, Fair Ison, TRW, rate your credit. above 600-->good credit.
Bank rates you on three things
Possibilities for a NOI that is too high:
Expenses are too high
Our rents aren't high enough
Our expenses are too high
Our density is too low
Okay, so there is a gap. How do we close it?
Try to close the gap:
Fine the supportable Mortgage
NOI/(Debt Coverage Ratio x Mortgage Constant)
Mortgage Constant: Yearly debt service for a dollar's worth of loan
Ellwood Tables: series of numbers that list all possibilities of interest rates and mortgage terms and mortgage constants.
Yearly Debt Service = (Loan x MC)
- Excel function: pmt (rate, term, -1)
- =pmt(.07, 30, -1) format cells to get the decimals
- to get monthly, divide rate by 12
- if you put the loan value instead of the minus one you get the...mc i think?
- DCR = (NOI/YDS)
- YDS=(Loan x MC)
- Loan = NOI/DCR *MC
+ my affective loan to cost ratio is super low
_________________________________
don't do it, lady.
start fiddling around with the costs.
negotiate a lower land cost
negotiate a lower construction cost
raise the rent
raise density (remember that this increases construction cost)
2 things to remember
when does density help?
when you are building apartment buildings and your land cost is below 15-20$/sqft, density rarely helps (it is cheaper to buy more land than to make a denser building).
good designer/good architect can design higher densities, keep the cost under control, and make the density seem low a.k.a. elegant density). always remember your client or you will have a building and no tenants.
Check out what a lower interest rate would do and lower parking spaces--> it would lower the MC which would get you a bigger loan
that's not really realistic
so check out your expense rate since you are in control of this.
hold on to the land for a year or two and wait and see if the interest rates go down.
always use current cap rates--> no one can predict
relationship between cap rate and the rent (chapter 7 explains)
---------------------------------------------------------------------------------------
Financing
- Two types of loans
- Mortgage loan
- compound
- long term
- 2 types
- non-recourse: if you as the owner fail to pay, they can take back your property
- recourse loans: the bank can take back any of your assets, up to the value of the loan (happens when market is risky)
- 30 year mortgage: fixed rate level payment fully amortized loan
- fixed rate: rate doesn't change
- level payment: the payment doesn't change
- fully amortized: at the end of the amortization period, you've paid back the entire loan
- adjustable or variable rate mortgage
- variable payment: monthly goes up and down
- fully amortized
- Adjustable rate or Variable payment, negative amortization loan
- at the end of the loan you can owe money on the loan
- never get these, ever.
- Simple interest rate balloon loan
- you pay along the way
- you pay the premium and forgone interest at the end
- Interest only balloon payment
- reverse annuity mortgage (RAM)
- the bank takes out a mortgage on your house
- you get a monthly payment from the bank
- at the end of the period your bank owns your house
make payments for five years but the interest and the principle are geared to a 20 year period.
lenders like short terms and long amortization periods because the lender is protected from interest rate risk. adjustable rate mortgages are also good for banks.
difference between market value and outstanding value]
the bank will look at your past record when you go to get a loan, Fair Ison, TRW, rate your credit. above 600-->good credit.
Bank rates you on three things
- credit score
- property
- commission an appraisal
- ability to repay the loan
- income
- tenants paying the rent
- DCR= NOI/YDS
- you want it to be greater than 1.1
- Loans to value Ratio: 80%
- house costs 100,000
- %80,000
- Qualifying ratio
- YDS:Income
- only for owner occupied
- should not be more than 22-33%
- Gross
- without taxes
- Net
- with taxes
- fees for the lender to initiate the loan (1-2% of the loan)
- points: prepayment to cover the risk of a higher rate in the mortgage backed security spread process (rate difference between the primary adn secondary market)
- bank sells you a loan at 6% but fanny mae is only taking loans at 7% or higher.
- Conventional/Conforming Mortgages: traditionally up to 400,000
- Jumbo Mortgages: 400,000+, held in bank portfolios, .5-1% increase in mortgage
- Prepayment penalties
- lump sum paid when you get out early
- residential prepayed penalties were outlawed in the 80s
- still can do it for commercial
- Participating loan
- for commercial properties
- the lender gets a share of the cash flow
- borrower gets lower interest rate
- can finance more of the project
Monday, September 22, 2008
From Traditional to Reformed..." (Matt)
This article is on the different types of land use regulations in the United States.
Major question: Do regulations help or hurt local development patterns?
Answer: It depends on what you care about? Density? Affordable housing? Open space? Business? Simply put, different land use regulations have different outcomes....
One outlook: "To the jurisdictions that use them, of course, regulations allow residents to reduce competition for public services, balance the budget, and protect valued open space, therby raising property values and wealth for property owners."
zoning history...comes out of public health concerns; still favored because separate land uses seem to stabilize property values
Zoning: exclusionary land use used in Northeast; separate land uses seem to stabilize prop. values
Comprehensive Planning: Western cities; mitigate conflicts between different land uses
Containment: Portland and Nashville; state law requires containment (keeping development in certain approved areas)
Infrastructure Regulation: highest in West; impact fees placed on developers who put increased demand on local infrastructure
Growth Control: permit caps on construction; SHORTAGES in housing --> not very popular politically
Affordable Housing: affordable housing incentives very popular in West
Types of Regulation by Order and Family
Traditional:
-Middle America (zoning; restrictive densities)
-High Density (New York City Metro Region in New York state)
Exclusion
-Basic Exclusion
-Exclusion with restriciton
-Extreme Exclusion
Wild Wild Texas
-Houston (little zoning)
-Dallas/San Antonio (zoning)
Reform
-Containment
-Containment-Lite
-Growth Management
-Growth Control
Conclusions:
*Densities in metro areas with Tradtional land-use regimes are falling much faster than anywere else.
*Center city is desirable in Texas and Reform areas, but seen as neighborhoods of last resort in areas with exclusionary and traditional planning.
*Housing prices = highest in Growth Control/Exclusionary areas
Major question: Do regulations help or hurt local development patterns?
Answer: It depends on what you care about? Density? Affordable housing? Open space? Business? Simply put, different land use regulations have different outcomes....
One outlook: "To the jurisdictions that use them, of course, regulations allow residents to reduce competition for public services, balance the budget, and protect valued open space, therby raising property values and wealth for property owners."
zoning history...comes out of public health concerns; still favored because separate land uses seem to stabilize property values
Zoning: exclusionary land use used in Northeast; separate land uses seem to stabilize prop. values
Comprehensive Planning: Western cities; mitigate conflicts between different land uses
Containment: Portland and Nashville; state law requires containment (keeping development in certain approved areas)
Infrastructure Regulation: highest in West; impact fees placed on developers who put increased demand on local infrastructure
Growth Control: permit caps on construction; SHORTAGES in housing --> not very popular politically
Affordable Housing: affordable housing incentives very popular in West
Types of Regulation by Order and Family
Traditional:
-Middle America (zoning; restrictive densities)
-High Density (New York City Metro Region in New York state)
Exclusion
-Basic Exclusion
-Exclusion with restriciton
-Extreme Exclusion
Wild Wild Texas
-Houston (little zoning)
-Dallas/San Antonio (zoning)
Reform
-Containment
-Containment-Lite
-Growth Management
-Growth Control
Conclusions:
*Densities in metro areas with Tradtional land-use regimes are falling much faster than anywere else.
*Center city is desirable in Texas and Reform areas, but seen as neighborhoods of last resort in areas with exclusionary and traditional planning.
*Housing prices = highest in Growth Control/Exclusionary areas
Sunday, September 21, 2008
Chapter 12- Stage Two: Refinement of the Idea
Objectives of Stage Two:
The developer's idea must either evolve into a particular project design associated with a specific piece of land or be abandoned before extensive resources are committed to the concept.
Primary steps are:
After making an assessment of the site you enter stage three: deciding to go for it or get out.
---------------------
A More Detailed Scanning of The Environment: Competitors and Governments
Need to understand local politics but remember they will continue to change
Choosing the Site:
Just be knowledgeable of the market and the area or use more technical ways.
Financial Feasibility
?s ask rachel
The developer's idea must either evolve into a particular project design associated with a specific piece of land or be abandoned before extensive resources are committed to the concept.
Primary steps are:
- legal and physical feasibility
- acquiring a site
- crucial
- 10-30% of proj's tot cost
- location is the key to realizable rent
- issue between tying up the site early with uncertainty but a greater margin for profit or taking time, increasing costs and exposing financial interest in the land
- be sure to involve the public and get them on your side
- marketing
- financial tasks
- management functions
After making an assessment of the site you enter stage three: deciding to go for it or get out.
---------------------
A More Detailed Scanning of The Environment: Competitors and Governments
Need to understand local politics but remember they will continue to change
- make friends with local officials/politicians/general public
- learn about competitors
- keep up to date
- People can make urban growth happen!
- book uses LA as an exciting example of what human beings are capable of
- People congregate to pursue economic opportunities that are less avialable at lower social and physical densities.
- Concentric Zone Theory
- Cities grow in concentric rings
- sort of outdated due to transportation innovations
- Axial Theory
- dev among transportation routes
- provides access
- commuting time rather than distance that dries location
- Sector Theory
- waves of development move outward from the central city
- looks like a pie
- agglomeration influences business location
- involves careful analysis of growth over time
- e.g. Atlanta
- edge cities are a "often a worthwhile investment"
- land availability
- more opp for density
Choosing the Site:
Just be knowledgeable of the market and the area or use more technical ways.
- GIS
- Forecast where development will occur
- Gravity Models
- spatial interaction models help predict
- population movement
- traffic flow
- store patronage
- shopping center revenue
- establish the buildable sqft
- environmental obstructions
- flood planes
- soil type
- hazardous waste
- some places require an archeological survey--just FYI
- Prices/dwelling unit are much more clustered than prices/SQFT of site area
- check out current zoning
- look for possibility of future changes
- subdivision regs
- specify the quality of infrastructure
- ideally specifies the quality and not the material used
- Figure out if you need any environmental changes
- gradient, runoff, drainage, etc.
- Get building footprint from architect
- determines whether or not the building and the parking can be placed on the site
- must coordinate with the environmental stuff (obvi)
- usually executed with the architect
- land value relies more on the land's visibility and proximity to customers and services than on its inherent productivity.
Financial Feasibility
- Do a back of the envelope analysis only with better info (basics)
- focus on how much start up capital is necessary
- figure out where it will come from
- option and purchase agreements should contain contingency clauses and specify that protective warranties wil be included in the deed
- ensure that the seller provided all possible guarantees to the title's quality
- constructive notice to public
- have release clauses and/or
- possible in a seller financed mortgage
- allows a borrower or developer to obtain a first lien on a portion of the land by paying a portion of the seller's financing note.
- subordination clauses in the option or purchase agreement
- a promise to move from a first lien position to a second lien position under specified circumstances.
- must be written into any option agreement so that they are subsequently included in the seller's financing.
- help to ensure that project is acceptable to the community
- informally present to city officials
- do good market research
?s ask rachel
Chapter 11- Market Research: A tool for generating ideas.
The first few pages of this chapter are definitions so here it goes:
Due diligence: research conducted before buying a real estate property
Entitlements: research completed to understand the most desirable zoning and deelopment conditions to seek
Programming: research conducted to determine the sequence, product mix, and amenities
Project positioning: research that informs the market niche for the project
Sales: research to determine the most efficient marketing and sales programs
To begin, market researchers examine both the macro (political structure, demographics, sociocultural attitudes, etc.) and micro (suppliers, consumers, competitors) market levels.
Summary of marketing concepts relevant to the development process:
Market research should determine how to address the following:
Product Positioning
Purpose of market study:
Ten Crit Questions that Market Research Must Answer
fuck i just realized this is chapter 11 which i think meg did already so im going to stop there.
?s ask Rachel
Due diligence: research conducted before buying a real estate property
Entitlements: research completed to understand the most desirable zoning and deelopment conditions to seek
Programming: research conducted to determine the sequence, product mix, and amenities
Project positioning: research that informs the market niche for the project
Sales: research to determine the most efficient marketing and sales programs
To begin, market researchers examine both the macro (political structure, demographics, sociocultural attitudes, etc.) and micro (suppliers, consumers, competitors) market levels.
Summary of marketing concepts relevant to the development process:
- marketing is a social and managerial process
- wgroups get weat they want and need by exchanging products of value with each other
- marketing occurs because humas have needs
- products can sometimes satisfy these
- Products can be obtained in several ways
- most people acquire goods by exchange so we specialize in one thing
- Market size depends on the amount of need or want and their ability to pay for those needs/wants
- a marketer is someone looking for one or more prospects who might engage in a exchange of values
- Marketing management: perhaps the most intuitive of the bunch, marketing management is the process of planning and executing the conception, pricing, promotion and distribution of goods, services, and ideas to create exchanges with target groups that satisfy customer's and organization's goals.
- sellers send goods or services produced by industry
- sellers communicate to the market
- sellers receive information from buyers
- sellers receive money from buyers
Market research should determine how to address the following:
Product Positioning
- figuring out who is the product going to be most interesting to and targetting those people
- style, quality of finishes
- buyer's preferences
- part of the primary real estate offering
- e.g. spacious entry ways, health club, VIP parking
- the amount and placement of different sizes and types of the product
- e.g. percent distribution of unit sizes and types
- Components of a pricing model
- how fast demand will absorb the product.
Purpose of market study:
- determine the size of the market
- come up with conclusions on financial inputs such as projected absorption rates, product mix, and price points.
- determine the target market for marketing strategy
- useful info for other stakeholders
- gets the info you need to secure a loan
Ten Crit Questions that Market Research Must Answer
- What are the types of trends in this type of development?
- important because market research cannot determine future trends--it takes your own observations or that of a trend setter like Rachel Zoe or Urban Eye's Melena Ryzik.
- The book suggests that you look at trends over time and actually try to predict the future yourself. Some of us are better at that than others. Know thyself.
- if you aren't good at this or you are but you don't trust your judgement, there are techniques!
- interview stakeholders and leaders in the industry, read periodicals, write down key messages from each source and make a spreadsheet of the info.
- Planners are pretty rad at this component because we are constantly in the know about all population trends and we are typically pretty hip.
- What is the current market?
- profile current buyers and tenants to reveal potential customers
- find out who they are and something about their lives
- demographics/statistics are good right about now
- you can find these on the census but you should know that because you went to census camp.
- What is the depth of this market?
- find out what the potential size is
- The book has nothing to offer in terms of technique about this except to let you know that it is "quite a challenge."
- What are the market's perceived values?
- Demographics
- statistical data
- questioning potential clients
- psychographics
- sweet vocab word meaning the study of psychological profiles of potential buyers
- What opportunities and challenges does the current market profile create?
- figuring out how to reconcile people's wants and aversions (NIMBYism)
- SWOT anal
- study all people affected by project to be sure you will have public support
- How do you determine and gain an understanding of your target market?
- narrow the target market
- use one of these:
- focus groups
- surveys
- What are market positions, development programs, price points, absorption, and lessons learned for competitive projects? Who are their buyers?
- look for info about competing projects and their marketing materials and their sales centers
- websites
- brochures
- sales kits
- sales center (after you have well thought out questions)
- third party reviews
- What are the market positions, development programs, price points, absorption, and lessons learned for competitive projects? Who are their buyers?
fuck i just realized this is chapter 11 which i think meg did already so im going to stop there.
?s ask Rachel
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