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40 Cards in this Set
- Front
- Back
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Horizontal Development/ Land Development
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process of changing raw land into a useable building site
this includes constructing improvements to the land such as streets and utilities and subdividing the raw land |
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Vertical Development/ Building Development
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the process of constructing improvements on a developed site
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Real Estate Developer
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a person, or firm, that both develops land and/or constructs improvements on developed parcels
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Development Team
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consists of participants who supply services, materials, and labor as well as suppliers of financial capital
- suppliers of financial capital - consulting professionals - general contractor - construction manager |
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equity partners
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contribute much of the equity capital for the project
equity joint venture- joint venture partners supply the funds while the developer provides the managerial skills mortgage joint venture- lenders receive a portion of the cash flows from operations and sale in addition to mortgage interest payments construction financing partners- (banks) generally needed to finance the construction costs of the project permanent financing lenders- finance the sale and/or operation of the project after it is constructed |
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consulting professionals
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lawyers- involved with the acquisition, development, operation, and disposition of property (also with writing and reviewing contracts)
architects- translate the ideas of the developer into construction documents and specifications engineers- work with architect to ensure that the plans are structurally and technically sound marketing agents- may be retained by the developer to lease or sell the completed space |
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general contractor
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oversees all aspects of the construction of the project
some developers may serve as their own general contractor subcontractors are hired by the general contractor to complete specific tasks such as plumbing, painting, and electrical |
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construction manager
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serves as the developers on-site agent
handles all issues with respect to the construction of the project in the best interest of the developer |
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The Development Process
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first stage: the idea
second stage: the site third stage: feasibility fourth stage: the contracts and approvals fifth stage: the improvements sixth stage: project completion |
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First Stage: The Idea
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the idea embodies the developers preconceptions- size, location, and and the types of tenants or buyers who will ultimately use the space
it also includes intuition about key issues, such as financing and preliminary feasibility |
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Second Stage: The Site
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most important activities= site selection, site analysis, and the acquisition of development rights
acquiring development rights may include use of the following: option contracts, contracts for sale with contingencies, binders, and letters of intent |
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Third Stage: Feasibility
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information from the market analysis component of the feasibility study yields the evidence necessary to develop financial expectations for the project
the market analysis also helps the architects and engineers to develop schematic drawings and cost estimates the feasibility study, architectural drawings, and project cost estimates, along with an independent appraisal and developer financial statements, comprise a major portion or the loan submission package |
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Fourth Stage: Contracts and Approvals
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at this stage, developers obtain commitments from lenders, sign contracts with the general contractor and construction manager, sign leases with major tenants, and enter into partnership agreements with equity partners
the process of securing approvals from public agencies occurs during this stage (zoning approval, building permits, etc) |
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Fifth Stage: The Improvements
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during this stafe the building is constructed (on time and on budget) and leasing (or sales) activities proceed
the marketing effort becomes a high priority because the success of the project ultimately depends on the timely absorption of the project |
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Sixth Stage: On to the Next Project
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when the structure becomes "habitable" in the opinion of the building inspector, a certificate of occupancy is issued
the completion of final punch list items by the subcontractors, receipt of lien waivers, and the release of retained payments by the developer ends the contractual relationship the relationship between the developer and the construction lender ends when the permanent loan is acquired the equity owners take control of the property |
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Equilibrium vs. Disequilibrium
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equilibrium- market compensates the developer with normal returns on their investments of time and money- they earn the risk-adjusted required rate of return
disequilibrium- developers stand to make either extraordinary returns or suffer extraordinary losses |
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The following guide developers in making the decision to develop:
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- current vacancy rate
- dividend return from operations to equity owners - total cost of the development versus the value of the developed property |
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Physical Real Property Rights
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- surface rights
- subsurface rights - air rights - public fly-over rights states following ownership-in-place concept recognize oil and gas as part of land ownership |
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Real vs. Personal Property
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real property- land and anything permanently affixed to the land
personal property- all other tangible property fixtures- refers to something that was once personal property but has become a part of some real property trade fixtures- personal property consisting of display counters, cabinets, mobile partitions and the like in commercial buildings such as shipping centers and office buildings |
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Legal Rights of Real Estate Ownership
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- right of exclusive possession and control- owners have the legal right to control entry to their property, collect damages in the event of trespass, and to use the property as collateral for a loan
- right of quiet environment- owners have a legal claim to their property without unfounded disturbances from those claiming defects in the title - right of disposition- allows owners to transfer ownership to others |
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Estate
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the degree of legal interest a party has in real property
-estates in severalty- only one party owns real estate - concurrent estates- involve real property ownership by more than one owner -freehold estates- held for an indefinite duration -nonfreehold estates- have a duration set by a private contract |
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Freehold Estates
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- fee simple absolute
- determinable fee - fee simple subject to condition subsequent - ordinary life estates - legal life estate- homestead - legal life estate- dower and curtesy |
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Non-freehold Estates
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- estate for years
- periodic tenancy - tenancy at will- - tenancy at sufferance |
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Joint Tenancy
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two or more properties owning property together
for joint ownership to exist there must be: - unity of time- ownership rights must begin at the same time - unity of title- ownership rights must be transferred under the same title -unity of possession- all owners must have an equal ability to use the property - unity of interest- the ownership rights must be equal among all owners |
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Tenancy by the Entireties
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a form of concurrent ownership, existing in some states, for husbands and wives
-unity of person- the owners must be married |
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Tenancy in Common
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co-owners:
- have an unequal interest - have separate titles to the property - have rights that begin at different periods - have equal use of the property no rights of survivorship (if one owner dies, the other gets their share) |
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Community Property
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in contrast to common law property states, recognize the husband and wife as equal partners in certain community property. each have 1/2 interest in property acquired during marriage
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Condominium and Cooperative
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condominium- form of co-ownership of real estate with fee simple ownership of units, and ownership as tenants in common for the common areas
cooperative- ownership form where individuals own shares of a corporation which in turn owns real estate |
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Tenancy in Partnership
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- partners share properties equally
- interest may not transfer without the consent of other partners - properties are exempt from the rights of dower and curtsy - the claims of creditors must be satisfied prior to any division of the properties |
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Real Estate Investment Trusts (REITs)
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a trust is an arrangement in which one party (REIT) holds property for the benefit of others (shareholders)
the ownership rights of REIT shareholders resemble those of corporations |
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Government's Role in Determining Property Rights
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1. police power- inherent right of government to control the activities of people and companies to protect the health, safety, moral character, and general welfare
2. taxation- power of local government to levy ad valorem real estate taxes represents a limitation on real property rights 3. eminent domain- governments and their agencies have the right to acquire private property for public use, the property owner is entitled to just compensation for the property 4. excheat- right of government to claim ownership to property for which the owner died and there are no known heirs |
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Easements
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involve a right to use the lang of another
ex: access roads, rights-of-way, utility lines, drainage and flood plains, and solar access |
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easement in gross
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most common form of easement
creates rights that "run" with the uder because the party granted the right must use the land for a specific purpose (i.e. utility lines) |
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easement appurtentant
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involved the rights that "run" with the land (i.e. access roads)
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other types of easements
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easement by implication- purchaser reasonably believed that an easement would be conveyed with sale
easement by necessity- rights to access landlocked property easement by prescription- a means of acquiring use to property by past, long-continued use |
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restrictive covenants
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property owners may impose limitations on the use of a property by future owners by including restrictive covenants in deeds to the property
ex: can only build so high on land |
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liens
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this restriction involved the right of a creditor to petition the court to force repayment of a debt through foreclosure and sale of property
ex: tax liens, mortgage liens, and mechanics liens |
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Largest single source of revenue for most local governments
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tax on real estate property
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ad valorem
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according to value
property taxes are levied on real estate based on their assessed values |
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5 Types of Taxes
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poll tax- flat tax on all male adults
property tax faculty tax- tax on a person's trade import tax- on goods exported and imported excise tax- on some consumption good such as liquor |
