V11 Economic Feasibility

- Real estate market and financing - Economic model - Client counselling services

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Flashcards	11
Language	English
Category	Micro-Economics
Level	University
Created / Updated	30.01.2020 / 30.01.2020
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What specific costs are part of the investment costs?

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Land Cost
Production cost

What has to be accounted for the gross yield?
Mention the typical percentage rates as well.

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Return of investment (3% Interest Rate for owners equity / 3% mortage rate "Hypotekarzinsen")
Depreciation (Abschreibung) (0.5%)
Management Cost (1.5%)

There are 3 different kinds of mortgage rates name them, name a pro / con and sort them according to the market share its used. And tell for whom it's suitable.

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Fixed:
+ Low risk, predictable
- No profit if interest rates fall
-> Suitable for private individuals

Libor mortgage
+ Profit if interests falling
- Risk of increasing interest rates
-> Suitable for semi-professionals and professionals

Variable-rate mortgage:
- Non-Transparent
-> Suitable for professionals and short term financing

What is the typical depreciation period?

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25-50 years

What are typical elements of Management Costs?

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Administration
Maintanance
Operating costs
Risk premium

There are two different types of "rent" name them and explain.

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Economic rent: Required income
Market rent: Possible income

Repetition: How can the production cost out of the building cost be estimated?

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PC = BC / 0.9

How can be evaluated if I should buy a land for a building?

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1. Calculate the Investment Cost = Production Cost + Land Cost

2. Calculate the Economic rent

3. Find out the Market rent with references

4. Affordable if: Economic rent > Market rent

If you buy, build and transfer. What Benefit and Risk rate shoud you choose?

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10%

That is different in a cooperative?

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The Land Cost does not have to be considered = 0

Given the Floor Area of a building how can the chargeable floor are be calculated?

ChFA: Main usable area (80%)** + Circulation area (10%) + construction ares (5%)*

*Excluding the outer wall area

** without basement area!

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V11 Economic Feasibility

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