THE FOUR PILLARS OF REAL ESTATE INVESTING: The Essentials of Risk/Reward Analysis - Couverture souple

Oharenko, Mr. John; Liu, Dr. Crocker; Larkin, Mr. Dean; Peck, Ms. Jeanne

Couverture souple

ISBN 10 : 1733287272 ISBN 13 : 9781733287272

Editeur : RECI, 2023

Synopsis

Four Pillars covers the essentials of real estate investing, starting with discussing the resources essential to every venture: land, labor, capital, and entrepreneurship. Four Pillars recommends operating real estate properties to create positive social and environmental outcomes for the community while earning appropriate risk-adjusted returns. This investment thesis emphasizes realty ownership as stewardship rather than a for-profit venture.

Understanding risk-adjusted returns serve as the foundation for Four Pillars financial analysis. As such, this book organizes real estate investing as a risk/reward decision illustrated by four separate pillars, together spelling R-E-C-I as follows:

(1) Risk/Reward Analysis: Establishing investment profitability goals requires creating risk/reward strategies with measurable benchmarks. Most importantly, investors need to be aware of a wide range of risks, including universal, direct ownership, and other known and unknown risks. After understanding such risks, investors review possible rewards, including tangible and intangible benefits of various investment strategies (core, core plus, value add opportunity).

(2) Evaluation of Risk/Reward: Having selected an appropriate investment strategy, the next step in the process focuses on finding specific project opportunities. At this stage, using the 5 P's of Underwriting (People, Place, Project, Performance, Pros/Cons) is a suggested format for sizing risk/reward. Popular financial analysis formulas for measuring economic performance at a specific time include static indices such as ROI, simple ratio tests, front door/back door, and DICE. Dynamic measurements, mainly discounted cash flow analysis, provide expanded financial decision-making corresponding to the projected holding period.

(3) Cycles – Risk/Reward Timing: Given the cyclical nature of the real estate industry, wrong timing shatters well-conceived and analyzed ventures. As a result, understanding emerging patterns within liberal, conservative and neutral cycles creates additional opportunities to restructure or abort pending opportunities. However, if acceptable financial loss tolerances exist, maintaining solvency remains the best risk/reward management tool for carrying salvageable assets through unforeseen cycles.

(4) Investing – Risk/Reward Launch: Lastly, finding capital to trigger the investment proves one of the most rewarding steps in the analysis process. The investment opportunity converts to a "real deal," in contrast to a financial exercise. The search for funding includes qualifying equity, debt, and hybrid combinations matching investors' profitability [risk/reward] goals. The selection process covers funding capacity and compatibility with the ownership team (e.g., LLC, REIT), lenders, JV partners, guarantors, and other capital contributors. In addition to funding the venture, the investors must include a solvency plan to provide sufficient liquidity to cover unforeseen risks (e.g., cycle shift).

Détails de l'édition

• Éditeur: RECI
• Date d'édition: 2023
• Langue: anglais
• ISBN 10: 1733287272
• ISBN 13: 9781733287272
• Reliure: Broché
• Nombre de pages: 257
• Coordonnées du fabricant: Manufactured by Amazon on behalf of the author; https://www.amazon.fr/hz/contact-us; ; c/o Amazon Media EU S.à.r.l., 38 Avenue John F. Kennedy; Luxembourg; L-1855; Luxembourg