Property Function of a Proposed Venture - Literature review Example

Topic: PROPERTY FUNCTION OF A PROPOSED VENTURE (Name) (Institution) Real estate has a broad definition expanding to all natural and human improvements attached to the land. According to Kenneth (2006) the word real extends its definition to the bundle of real rights which are associated with the ownership of this asset. The parcel of the real property can be owned and controlled by different parties in which one owns the surface rights while the other owns the air rights together with the owning of the sub-surface rights. All the transactions of the real estate no matter how simple reflect the complexity of laws governing real property. The classification of all property that does not fit the real estate definition is a chattel, or a person property. Buying, managing and selling real estate is one of the most profitable and rewarding investment majority has invested in. The diversity of the real estate investments ranges with the number of people being involved in occupation of this rental homes through the diverse time horizons. Investors differ in decisions with some interested in short term approach, this is usually by flipping and rehabbing the house while other investor will prefer to adopt a longer term approach which is usually by buying, managing and holding rental houses for along period. In most cases the kind of investment one wishes to make depends on the type of objective he/she has for the real estate business to be started. The world of investment is diverse with variety of option laid ahead of the investor in mention but the choice made in decision making also depend on the financial capability and the risk to be taken into consideration. Targeting a possible real estate property and analyzing its true value in order to achieve the most through one’s investments whether the main purpose of the deal to sell or to rent gives along term strategy which is often based on sound marketing principle. This is usually to leverage the property bought and create efficient cash flow without much capital investments. Kenneth (2006) further argues that the best chance of getting good entrepreneurs is not when you are seeking for them but when you maintain your relationship with excellent professions all the time. Those termed as customers for a business are those with constant ability to buy or to hire the real estate and are willing to advance to buying or hiring given the conditions necessary for the negotiation or hiring. Maintaining contacts and efficiency in broker franchise and the customer network is a principle objective to attaining great prospects in realization of investment goals. On negotiating time, pressure plays significant role when buying a real estate, if one understands the effect on the seller; the realization on when to use this pressure eventually leads to giving you good buy on the real estate. Pressure benefits greatly in every negotiation mostly because people become flexible under time pressure. Great success in this investment depends much on how great one can negotiate. Much trouble befalls individual who invest with the real market price and wait for the prices of their parcel to rise with time the most advisable is taking the bigger fool theory which indicate that “if you buy for nothing done, it does not matter what you pay. There will always be a bigger fool coming along who will allegedly bail you out.” (Kenneth, 2006) In real estate speculation do not play part significantly if one buys right there is large chance of making money even if the prices do not go up. The decision of the entrepreneur to setting up franchise operation may be brought into being by the urge of the enterprise to reach out to as many tenants as possible in a wide geographical area given the broad geographical conditions set by the nature of work, the number of the tenants one is looking forward to reach out to and the understanding of real personal understanding of real estate business as a socio-economic public with ample knowledge on real estate development program and various kind of real property acquirement. Franchising this has been a method of doing business with the franchiser authorizing commence of business by the franchisee. Franchisee there after does business for a fee and /or a percentage of sales/profits. The franchiser avails various tangibles and intangibles like training and advertising among other support services. Depending on the earlier research analysis that has been conducted there are ways to benefit in owning a Real Estate; this is given by the increase in value which in most cases is attributed to the appreciation of the asset. The benefit accrued when reductions in loan principals through savings from tax and income generated from the rent. The real estate value precipitates through appreciation and/or increases in the price which is initiated by two factors, i.e. increase in money supply and increase in demand. The fact that the owners of the rental property's accrues through reduction of the loan principal on each month that the rental house is paid, indicates that the interest and the principal are gains since payment are made year after year eventually total payment of the loan is made in full. The great speculation on real estate has been focused by most investors and economist as a preferred way in investments. Real estate broker is the often used to refer to the intermediary between the seller and the buyer of this estates. As we put importance on the difference between price subject, Real estate development; and market value some consideration are put in to account, i.e. the willingness of the buyer to pay premium over and above the market value if his investment value is higher than the market value of the real estate worth. Economies of scale is one of the considerations that is put into account if the combination of the estate and that of the neighbor makes him enjoy this economies of scale. The most common rationale is that the price worthiness of the asset summed up is greater than in parts the privileges of the full ownership of the real estate/property market. The task of the real property appraiser (property valuer) to judge whether the price obtained under certain transactions is indicative of the market price of the real estate value. This appraisal of assets are often done in certain standards of value, some of the commonly used are the foreclosure value, the investment value, the fair market value, and the distress sale value. This investment value is the value of one particular investor and usually high than the market value of property while the insurable value is the value of the properties insurable by the insurance policy this does exempt the value of the land. The other value considered is the liquidity value for adjustments to the comparable sales for principal sales concessions. The appraiser's objective is on what approach to make among the three major approaches; the cost approach, sales comparative approach, and the income approach. Choice made is based on the effort from the development of the appraisal analysis, cost, sales and income varying widely from various situations. In the sale comparison approach sales of the property together with the analysis of the market price are adjusted to account for the differences in the comparable, the subject is to determine the market price of the subject in mention. This is considered the most reliable if comparable sales exist. There got a lot of ownership interest on the appraised property in most common situations like mortgage finance. In many situations and in many societies which hardly follow the English Common Law of the Napoleonic Code, some other interest may be common while there are various interests in real interest. The Fee simple value is the most complete ownership of the real estate in the UK also known as the freehold. Other than the free Simple value there is the Leased free Value and the leasehold Value, to look onto the leased fee value the simple fee is encumbered by a lease. When this lease is at market rent the fee simple value and the leased fee value are seen to be equal. The leasehold value is the interest held by the tenant; the moment he/she pays the market rent of the estate then the market value of the tenant is said to have no market value a good example is given when a major tenant has an ability to negotiate below the market lease to serve the tenant a shopping center. In some cases the lease hold may be transferred to a third party i.e. another anchor tenant if the retail one has got an interest on the estate. The recent corroboration of various international Valuation standards has greatly facilitated global real estate appraisal. In the United States this appraisal are regulated by various states with commonly accepted standard to give quality licensor of the real estate. On the other hand strategy of ongoing real estate management of the UK estate appraisal is known as property evaluation. Real estate appraisals are made by valuers who in most cases are charted surveyors. The major task being evaluation of property, these evaluations are regulated by RICS (the Royal institute of Charted surveyors). Real estate mostly encompasses land and its permanent fixtures such as buildings with the development of private ownership of land this real estate business has been eyed as the major sector in development with many individual investing in real business. Valuation of real estates has been the initial step to enhance transaction of this estate. Real estate appraisal hence is coming up with the value of the real estate. In most cases land evaluation and its fixtures evaluation are summed to give the real estate value. This need of evaluation evolves from the heterogeneous characteristic of the real estate. The location of the property being the most important determinant of the value of that property, the opinion of the appraising professions is usually based on the market value. The price at which a property should have always been evaluated as the walrasian auction principal with the market value used interchangeably with the fair Value. Mortgage valuation is the assessed value of the real property given by an opinion of a qualified appraiser. Mostly a risk based pricing used to assure mortgage loans by a financial institution. Lack of ineffective real estate laws have been a significant barrier to investment in developing countries, in most societies the wealth of inhabitants is put inform of mortgages. In developed economies people use mortgage loans to improve their buildings. However, they are cautious of the bank ability to sell property once the owner is not able to pay back the mortgage loan. Real estate addresses basic terms of the need of housing, it is also an interesting investment product that should form an integral part of any portfolio. This real estate will at most time produce a prominent stand as any other investment product. To compare real asset with the movable asset the real asset lack serious scientific research, developing of the real estate from the old ways to inclusion of information technology sect increase efficiency and the value of the real estate. The IT office affects the rent levels due to competition with other concessions who are trying to fill their place despite the market situations. (Baum, 1995) Ownership of the Real Estate and Its Management The owner of the real estate may employ a broker to market the property or lease, maintain or even manage the owners property such a management is called the owners property management. In such a case the broker is made the owner of the property management through an agreement. As in any other agency relationship the broker has a responsibility either fiduciary or statutory to the client owner of the property, in such cases the broker’s responsibility is reduced to searching for suitable tenants for the premises. Isaac (2002) explains that the agency of this premise in the dual agencies (limited agency) will always produce two similar transactions. He argues that this dual agency has been put with sensitive requirement of two agencies at the same time and arises when the broker is the agency of the buyer or sub-agent of the seller, this limited agency is permitted by the buyer and seller and only opens to the broker. Taking the complexity of the real estate business and its large size this business goes beyond brokers and salespersons; it's far much bigger than this. Real estate appraisal, management, development, financing, subdivision, counsellings and education are all part of the all round real estate field. (Isaac, 2002) Brokerage is just but a term of bringing individuals together to a real transaction. The main function of a broker is bringing individual together to negotiating sales and purchases or rental of the property. On the other hand a property manager is a hired individual involved in the management and maintenance of the real property. This is the individual involved in collection of the rent finding tenants altering or constructing new places for the tenants under his/her management. Financing of this business involves making transaction possible. Most of the finance being derived from the mortgage loans, trust deed loans which are secured by the property. Funders of real estate may be the commercial banks, the saving associations together with mortgage brokerage institute. The subdivision and development of the real estate involves fragmenting of the real estate into considerably smaller parcels. Constructions and improvement of the mortgage falls under the section of development. The site improvement involves water lines and sewer i.e. for any business to develop the management looks for the means of attracting more customers and/or making his/her services durable to the customers. The drainage system then falls under great means of maintaining hygiene and cleanliness which at this point acts as a compulsory condition for real estate environs. In the sense that the subdivision and development of the real estate falls under the same category on-site improvement and the improvement of facilities like the swimming pools which are made on individual parcels. Home inspection as a profession allowing practitioners to combine their interest in the real estate management, the presence of the inspectors is to ensure quality construction of the estates and the property construction trades on in the engineering. This is another field of real estate development that can not go unrealized since the real estate sales contract is always contingent upon the report put forward by the inspectors report. (Brown and Matysiak, 1999) While counsellings provides client with mutual advice on the bases of intellectual, professional judgment, a high degree of professional expertise is expected from the counsels upon whom this responsibility is bestowed. Education is for both the practitioners and the consumers and all other institution conducting real estate education the skills and the knowledge of the people bound together by real estate development to realize profit and development in this investment gives high prospect to the real estate financial progress. (Baum and Mackmin, 1995) They have argued that Globalization and the international development of the real estate has seen this industry move greatly in some societies across the globe this has improved the local situation. This field of enterprise is independent. The mark of heterogeneity in the real estate gives strong tendency to adopt various approaches in regard to sector development and making categorical statement on real estate becomes rather hard. Distinguishing of many sub markets and market segments on the basis of type and location of individual parcels in this real property sectors becomes rather had, stability and solidarity of the market characterize certain segment of the market. Real estate can also be viewed as a production factor, a compliment on the natural resources, labor capital and technology. (Mike and Roger, 2004) In most cases the corporate real estate management and facility management has of late become an established values of the entrepreneur landscape. The matters of securitization real estate have developed greatly as a pre-dominant financial product. Development of the Asset into Financial Products Mortgage loan are inmost cases subjected to securitization since financial assets are characterized by low dependency on other assets. It also has got some considerable independence towards inflation with low growth and high yield. Real estate market being a vast, complex, worldwide economic system provide a setting of which establishment of the supply and demand will establish real market value for the trade to excel. In accordance to JB Says' law of demand, Supply create its' own demand with the uniqueness of the real estate that no two estate parcel are same irrespective of their construction similarity. The fact that these structures are immobile it becomes hard to relocate the parcels to satisfy demand where supply is low. With this in mind a conclusion that real estate are local market is justified each geographical location of real estate is different from the other even in the conditions that drive to their prices. Fillmore (2000) points out that there are several factor that affect development of real estate market these include; population, level of wages, rate of employment among others. Having a keen observation on population; basically shelter is a basic human need this makes it certain that the growth of population is directly proportional to the increase in demand for houses. In some areas the growth of real estate is faster than that of the population, in such cases investing in real estate under such pressure may not have positive outcome due to the competition from other investors and vise versa to a position where real estate development is slower compared to population Cetelis Palibus. Demographics; This being a description of a population distribution, the type of houses to be erected relate with the type of the occupants in that particular geographical area/community. To put much weight in the size of families, family income, age, the number of the offspring, lifestyle and growing number of single families. Employment and the level of wages; some of the crucial decision on whether to buy or rent house comes from the level of salaries and wages one attains. The decision on how much to spend on a house also sets in when this question is asked. (Hayward, 2000) Demand on real estates increase with the increase of job opportunities and salaries and drops with the decrease of the jobs and salaries. Real estates depends on the variety of economic forces such as interest rates and employment levels, to excel in real estates business licenses must check on the economic trend. References Baum, A. and Mackmin, D. (1995), The Income Approach to Property Valuation (3rd Edition). London: Routledge. Brown, G.R. and Matysiak, G.A. (1999), Real Estate Investment: A Capital Market Approach. London: Financial Times. Isaac, D. (2002) Property Valuation Principles, London: Palgrave. W.H. and Hayward, R.E.H. (ed.) (2000) Valuation: Principles into Practice , London: Estates Gazette, S, Robert (2007) When Bad Things Happen to Good Property Environmental Law Institute, Washington, DC The Appraisal Foundation, (2006) Uniform Standards of Professional Appraisal Practice. London: London Publications. McGraw-hill, The Appraisal of Real Estate (12th Edition). London: London Publications. Mike, S. and Roger, D. (2004), Millionaire's secrets to investing in real estates, New York: M-Hill professional publishers. Fillmore. W. (2000), Modern Real Estate practice 16th ed Dearborn real estate Education. Robert. S. (2004), Real Estate For Dummies, New York: New York Publishers Kenneth, W. (2006),Your Successful Real Estate Car Reference, London: Cambridge University Press Read More