Real Estate Finance: Asset Valuation

This course has two major objectives. First, this course provides an overview of topics related to real estate finance. Specifically, this course provides a detailed description of the discounted cash flow (DCF) model applied to real estate. The DCF model is the main financial decision tool used in the real estate industry, and we use it extensively in this course. Second, this course provides a brief overview of basic concepts commonly used in the real estate industry.

You need to have a good grasp of many different topics to become a successful real estate investor. First, you need to know how your investment properties work: Why do people drive to my retail center? What is the signage in my center? What is the income of the renters in my apartment building? Second, you have to develop a very good sense of the local economy: What are the main sources of employment in the area where I invest? How sensitive is the income of my properties to the local unemployment rate? Third, you need to understand how events in the capital markets may affect your investment: What happens to the value of my properties when interest rates come down? Or up? What if inflation goes up? What are the sources of capital available for the possible buyers of my real estate assets? Finally, you need to be able to put all these different aspects of your analysis on a single investment decision model (the DCF model) that allows you to properly evaluate the relative importance of all aspects of your investment. In this course, we do not have time to properly address all these topics in detail; however, this course aims to make you aware that successful real estate investors take into consideration many different issues when investing. Moreover, this course aims to teach you the mechanics of applying the DCF model, which is the tool that summarizes the assumptions of real estate investments.

This course aims to be useful to students interested in pursuing a career in real estate investment who have no experience in real estate. Students with a prior career in real estate may already be aware of many of the concepts described in this course. As a result, some of the lectures may be basic for these students. However, it is unlikely that these students have had previous exposure to the entire material of this course.