Real estate finance and valuation rely on some key principles that you need to understand, such as the time value of money, which entails that money today is more valuable than money in the future. Additionally, you must be familiar with the income approach which values real estate based on its expected income, as well as the sales comparison approach which uses the prices of similar properties. Lastly, the cost approach values real estate based on the cost of replacing or reproducing it, and how to account for depreciation, obsolescence, and land value.
To learn about basics of real estate finance and valuations it is important to know about sources of financing, interest rates, depreciation, various valuation approaches such as market approach, income approach and cost approach etc. Then it is also important to know about key terminologies used in the filed such as Cap rate, discount rate, NOI, Gross Rent, Net Rent, leasable area etc. This can be learn by doing various educational courses and becoming member of various professional bodies working in the relevant field and taking practical experience and training.
Somethings should start with a solid foundation which is usually quality education/training. I would take a course, probably starting with CCIM and then practice what you learned as part of your business coupled with good mentoring. With that being said, there is no replacement for experience. Education alone is not likely enough. I have often said that when I got out of law school, I thought that I knew enough to be a lawyer until I began to realize that my education did not begin until after I got out of law school
In my experience, carefully review the numbers in valuation, because you want the client to get the best value for their money. Be very honest if the numbers aren’t good. You want to always be congruent with their desires!
Buy well, half sold. Follow that principle and you should be fine … oh, and you make your own luck. There, you are now all set for success, until the bankers strike again!
Resources such as online bootcamps and professional certificate courses are a great starting point. Other than that, watching tutorials on how to build a model from scratch is my recommendation. As you start digging deeper into the subject matter, you’ll inevitably stumble upon questions pertaining to the core concepts. From there, use those moments to find the answer and allow yourself time to learn the fundamentals at play. There are tons of online resources to answer your questions.
Learning the basics of real estate finance and valuation can be achieved through reading books and articles. Real Estate Finance and Investments by William Brueggeman and Jeffrey Fisher is a popular choice, as it covers the theory and practice of real estate finance and investment analysis, with examples and case studies. The Appraisal of Real Estate by the Appraisal Institute provides the standards and methods for appraising real estate, with detailed explanations and illustrations. Additionally, Real Estate Finance and Investment Manual by Jack Cummings offers a practical guide to real estate finance and investment, with tips and tools for finding, analyzing, and financing properties.
There are various books to learn about real estate finance and valuation. Books such as Valuation Principles and Procedures by Ashok Nain, J. A. Parks Principles & Practice of valuation by D. N. Banerjee - Eastern Law House, The Appraisal of Real Estate - Appraisal Institute (US) can be used as a starting point.
Gaining knowledge, skills, and credentials to boost your career in real estate finance and valuation can be done through taking online or offline courses and certifications. The CCIM Institute offers the Certified Commercial Investment Member designation, as well as various courses on finance, investment, and analysis. The NAIOP provides the Certificate of Advanced Study in Real Estate Finance, covering core concepts and applications of finance, valuation, and risk management. The ULI also offers the Real Estate Finance Certificate, teaching the fundamentals of real estate finance, capital markets, and deal structuring.
Courses such as MBA / MSc in Real Estate is offered by various good institutions can be done. Certificate courses in real estate economics and finance from LSE is a good course to learn about Real Estate Finance and Valuation. There are various certificate courses offered by Professional bodies in valuation such as RICS, AI, ASA etc. which can be of great help.
To learn the basics of real estate finance and valuation, it's important to practice regularly. This can be done by analyzing real estate deals and projects with financial models, spreadsheets, and software like ARGUS, CoStar, or Excel. You should also compare different valuation methods and assumptions to understand how they influence the results and decisions. Additionally, seeking feedback and advice from mentors, peers, and experts can help you enhance your skills and knowledge.
Keeping up with the dynamic and ever-evolving fields of real estate finance and valuation requires learning and updating your skills and knowledge. You can do this by reading the latest news, trends, and research on the subjects from sources like The Wall Street Journal, Forbes, or The Journal of Real Estate Finance and Economics. Additionally, attending webinars, workshops, and conferences from organizations like NAREIT, ULI, or ICSC can help you stay up to date. Joining professional networks and communities like LinkedIn, CREW, or BiggerPockets is also a great way to stay informed.
Don't follow "The Art of the Deal" and understand there are 2 key principles: 1) Real estate is not liquid & you will need independent liquidity to sustain economic setbacks, maintenance, increase in xpenses (ie: real estate taxes), etc. 2) Speculative development and the dependence on income from real estate, or its sale are subject to factors beyond your control and may force liquidation under stress at deep discount.
The best way to learn about real estate is to listen to people with experience. While education is necessary, it’s through real world stories that the information you learned begins to make sense in ways that can allow you to grow in your career. Knowing how various situations actually work out over time teaches you likely outcomes and you can then understand what future scenarios might be. A Crystal ball is another good asset for predicting values 😀