The Asset Management Track is comprised of skill-based courses that, when taken in sequence, progressively build your knowledge of financing and valuation of real estate assets. You’ll work hands-on to explore various models of financial analysis in three applications-based courses designed to help you capitalize on your real estate assets. Students will find the tools they learn here indispensable to the properties and the portfolios they manage.
Asset Management - Part 1
Financing and Loan Analysis for Investment Real Estate (ASM603)
Learning Objectives
Lesson 1: The time value of money
In order to achieve the owner’s financial goals and fulfill your fiduciary obligations to the client, it is important to understand the concept of the time value of money, which is: Dollars in the future are worth less than dollars today. Long-term income streams must be discounted back to present value to determine their true net present value.
In this lesson, you will learn how to:
- Define the time value of money
- Compare income streams using compounding and discounting
- Organize data using T-bars and timelines
Lesson 2: Financing and loan packages
An investor can borrow a major portion of the purchase price of a property. Consequently, financing plays a large role in making decisions about real estate.
In this lesson, you will learn how to:
- List common sources of investment real estate loans
- Detail the elements of a loan package used to secure financing
Lesson 3: Loan structures and fees
Financing for a property may be required for acquisition, major replacements, and renovations. Thus, one of a real estate manager’s responsibilities may be to compare loan options in order to select the most advantageous loan structure form available. To do this, the real estate manager must understand the various types of loans that can be obtained in the marketplace today.
In this lesson, you will learn how to:
- Define common loan types
- List fees associated with financing
Lesson 4: Loan calculation
Although few real estate managers make decisions about financing on their own, an understanding of loan calculations leads to better decision making, assessment of financial condition, and knowledge of how a property operates.
In this lesson, you will learn how to:
- Compare financial calculation tools
- Calculate principal and interest on several types of loans
- Calculate effective interest rate
Lesson 5: Loan analysis
Equity holders and lenders alike invest in real estate because the returns are higher than those from “safe investments,” such as government securities. When evaluating a potential loan recipient, lenders examine a number of aspects of the potential borrower and of the property itself and weigh risks associated with financing. This is why the loan package needs to be complete and meet lender criteria.
In this lesson, you will learn how to:
- Define and calculate lender ratios
- Determine leverage position
- Conduct a break-even analysis
Lesson 6: Lender rights and recourses
Measuring risk helps lenders avoid making bad loans. However, even with all the best risk measures in place, lenders must have ways to protect themselves if a loan does not perform as desired or becomes delinquent. This could impact your property if it is not performing well and cannot meet debt obligations.
In this lesson, you will learn how to:
- Describe liens
- Explain loan workout arrangements
Asset Management - Part 2
Performance and Valuation of Investment Real Estate (ASM604)
Learning Objectives
Lesson 1: Financial performance
The owners you represent will have specific criteria for investment return on their cash equity. Four common calculations are used to measure investment return. The most significant test(s) will vary in each situation based on the individual investor’s goals for the asset.
In this lesson, you will learn how to:
- Define and calculate cash-on-cash return, value enhancement, NPV, and IRR
Lesson 2: Property valuation
In a sense, all of real estate finance is a study of valuation—how much a property is worth. The single most important contribution that you, as a real estate manager, makes is to build value for an investor— something that management staff can influence on a daily basis.
In this lesson, you will learn how to:
- Define highest and best use
- Compare three common valuation methods
- Derive the cap rate using several methods
- Apply equity capitalization to determine investment value
Lesson 3: Discounted cash flow analysis
When a property’s income stream is not stable, which can happen in real estate, each year’s cash flow must be discounted individually to its present value for a more accurate appraisal. Using DCF analysis for property valuation requires discounting income streams by a rate found in the market or from your own particular owner.
In this lesson, you will learn how to:
- Outline the components used to conduct a discounted cash flow analysis
- Calculate market value using DCF analysis
Lesson 4: Lease analysis
Many of the concepts discussed thus far can also be applied to analysis of leases. Discounted cash flow analysis is a key tool to determine the financial impact lease terms and concessions have on property income. The real value of leases drives cash flow, which in turn drives property value.
In this lesson, you will learn how to:
- Calculate effective rent on short- and long-term leases
- Compute buyout costs for early lease terminations
- Compare lease proposals with a variety of terms
Asset Management - Part 3
Asset Analysis of Investment Real Estate (ASM605)
Learning Objectives
Lesson 1: Taxation
While it is not the responsibility of a real estate manager to be an expert in tax law, you should understand how tax laws impact the cash flow of the investment properties you manage.
In this lesson, you will learn how to:
- Define taxes related to real estate
Lesson 2: Cash flow analysis
Real estate managers use measures of return to make the best financial decisions regarding a property in order to meet ownership goals. To that end, real estate managers must analyze a property’s financial status by conducting cash flow projections over the holding period, in order to establish a baseline of performance.
In this lesson, you will learn how to:
- Walk-through a cash flow analysis from start to finish
- Define and conduct a midstream analyses
Lesson 3: Analyzing alternatives
Once baseline performance is established, the real estate manager can propose and test the financial outcome of several potential alternative scenarios for the property from addressing capital improvements to reducing operating expenses and increasing net income.
In this lesson, you will learn how to:
- Analyze and compare several courses of action for the property
Lesson 4: Making a recommendation
After the as-is and alternative analyses are conducted, it is time to compare the results of each scenario and make the best recommendation, based on the specific goals of your ownership.
In this lesson, you will learn how to:
- Select a recommendation to present to ownership
Lesson 5: Case study
Putting into practice what you have learned thus far will help reinforce the concepts of before-cash tax flow analysis, testing alternatives, and making a recommendation.
In this lesson, you will learn how to:
- Apply all the concepts learned by testing alternatives and making a recommendation to a case study property
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