Real estate analysis

We can say that a building has no more value than the revenue that
produces the owner. Under this concept the value of a property is only the
present value of future cash flow it generates.
For the architect or the tourist city dweller this might seem a very stilted
worldview, however, such an approach is the only resource that has the
investor, appraiser and analyst to judge the value of a property.
Consequently, the general way to describe this type of investment is
presented in Figure 1.1.
The plot, despite being simple, summarizes the problem the analyst once all
the details and circumstances of a particular project faces have been
analyzed.

Of these elements the set of arrows that describe the salient features of a
financial project is derived: the down payment or down payment in cash,
cash flows after-tax and after-debt and estimated net profits to obtain the
time of disposal, ie at the time of selling the rights or property of good.

In simpler words, by investing in real estate one purchases a building to wait

for its value to increase and then sell to rent it immediately to repair or
remodel it and then sell or rent it, or to build (in the case of purchasing
land ) and then sell or rent it.
Investment in real estate for many specialists is one of the best investment
alternative because it allows one to acquire an asset that hardly
depreciates, which is likely to increase its value and, in some cases, can be
rented at a good price.

In other words, it is considered investing in real estate as a low-risk

investment, safe, and profitable.

However, unlike what many think, investing in real estate is not a simple
investment, as well as the need to have a good capital to invest, it is
necessary to have knowledge and good preparation that allows one know,
for example, choose well the property, how financed, and ensure that the
property will increase in value over time or you can rent it all year.

Despite being considered a safe investment and low risk, many people who
have decided to invest in bins roots have suffered great losses, either for
purchasing a misplaced property, not later find who rent it, or having to
repairs or remodeling that ultimately ended up being more expensive than
expected.
So before investing in real estate is necessary to analyze the property you
plan to buy, taking into account factors such as location, price, condition of
the property, the need for repairs or remodeling, maintenance will be
necessary, taxes payable, the credit needed to purchase the property and,
above all, the possibility that the property can be resold or can be rented at
a price that justifies the investment.

ADVANTAGES AND RISKS

This information was compiled in a specialized book on the subject of
investment in real estate called: ANALYSIS AND EVALUATION OF REAL
ESTATE IN THE MEXICAN CONTEXT / DOMINIQUE ACHOUR, GONZALO
CASTAEDA, THE EDITORIAL LIMUNSANOREGA.

Advantages of Investing in Real Estate

simple investment
The relative simplicity presenting investment management.

safe investment
Investment in real estate, usually, is a safe investment because real estate
is hardly depreciate assets, and, on the other hand, tend to increase their
value over time.
high profitability

Investment in real estate is usually a profitable investment; by investing in

real estate is possible to make money in the medium or long term, though,
usually, to start investing in them is necessary to have a good capital.

tax advantages
They have, for example, the tax deduction for depreciation, and other
advantages that exist in some countries such as the possibility of not having
to pay taxes if the gain from the sale of a property is used to buy a new
property.
Risks of investing in Real Estate
Specific business risk refers to the possibility of natural disasters: fires,
floods and earthquakes. When purchasing an insurance policy, the owner of
a property eliminates the possibility of a significant loss caused by a
calamity and predictable gladly replaced by the payment of an annual
premium. Exposure to business risk also depends on the operating leverage
of the property, the relationship between fixed costs, variable costs and net
operating income (NOI). The greater the share of fixed costs, the greater
should be the NOI to cover fixed costs and variable costs; in other words it
should be higher breakeven.
Exposure to specific financial risk is related to the capital structure of the
property: the relationship between debt and equity. The degree of financial
leverage (DFL) gives an indication of the elasticity of cash flows with respect
to changes in net operating income. The greater the share of debt in the
capital structure, the greater should be the NOI to cover the debt service.

What is an investment?

"An investment involves the renunciation of immediate gratification and

some that produce the financial resources invested in exchange for the hope
of obtaining an uncertain future benefit derived from the assets in which it
invests. Therefore, the elements that define an investment are:

The individual who invests or investor.

The waiver of satisfaction in this.
The product that is reversed.
The hope of reward or profit in the future. "
(Javier Iturrioz del Campo, 2015).

What is real estate?

"The real estate or" roots "are those who have a fixed and can not be
displaced situation. It is mainly known real estate real estate character, ie
apartments, houses, garages or other similar examples. "(Lic. Miguel Gomez
Martinez, 2015)

Real Estate Investment

Investing in real estate or real estate is an alternative to investing, which is

to buy a property either a house, apartment, commercial premises or land,
then sell it or rent.

"Integrating real estate as part of the diversification of their investments is a

viable option. If a correct choice (on investment) is the advantage is to
obtain profits up 30%, on an average three-year period. "(Sandra Hendrix,"
Forbes ", 2013).

Investing in real estate should be considered as a supplement rather than a

way to displace other investment instruments, it is part of the diversification
of a portfolio. The percentage of equity for the purchase of a real estate
property will depend on the amount of equity. For example, if someone has
five million pesos, 50% would be perfect.

When deciding on investing in a good root we get closer to a real estate

professional, then do it on their own account may mean you problems
because you must know in detail notarial and legal documentation and the
best areas to invest, which is avoid jeopardizing their heritage.

Steps to a good investment

1. "Where to start"
The first thing to do is determine the amount of money spent on such
investment, considering that this is a long-term investment (two to five
years) and which is not liquid. "From a million and a half pesos is acceptable
to invest in a building with less than that amount are reduced options.
Moreover, to generate surplus value-difference upon purchase against the
sale of a good Root- should be left to mature investment three to five years.
"(Sandra Hendrix," Forbes ", 2013).

The added value of a property depends on there being a large real estate
project, the area has projected to have major roadways or becomes a
fashionable area; features that a real estate consultant reaches glimpse.
2. "Risks and Benefits"
Some of the risks of investing in Real Estate would, be in need of immediate
liquidity; which is intended to sell above the market value and consider that
the time is going to make the sale can vary between six and twelve months.
Whereas, if a correct choice is made the advantage is to obtain profits up
30%, on an average three-year period will depend on the type of property,
where you are, this time it settles on the property and there have been no
adverse circumstances during the time it has taken the property.
Factors to be considered
"By investing in Real Estate should be considered that the property is
registered in the Public Registry of Property, knowing your tax situation,
which can escriturarse, which is legally Processed (which has scriptures),
which is not intestate, identifying defects hidden from the property and the
area is known.
Moreover, it considers that approximately 8% of the property value will
correspond to the notary and tax expenses. So you have to approach a real
estate specialist with long experience (...) a stock or insurance broker needs
a license to practice, not a real estate consultant, jeopardizing the heritage.
"(Sandra Hendrix," Forbes ", 2013) .
Presale
"Acquiring a good presale is an attractive option to invest high levels of
goodwill, if a project is in mockup or plane whose value at that time is a
million pesos is acquired, but it is known that at the end the project (in a
year or year and a half) its value will increase to two million pesos, for
example. However, consider the developer, PROFECO researching, visiting
their offices and asking for recommendations; thus the risk is reduced but
never eliminated. "(Sandra Hendrix," Forbes ", 2013).
Cities and states attractive for investment
At present, we can consider certain cities as stable in the country, they offer
greater added value to invest, and are: Puebla, Villahermosa, Riviera
Nayarit, San Pancho, Sayulita, Guadalajara and Bajio. In the conurbations of
D. F. found: Metepec, Calimaya and Pachuca. In the Federal District of
Lindavista and Roma colonies, some areas in Anahuac, colonies near
Polanco have since had a "boom" important.

Remodeling to sell
One option for investing in real estate is to buy to remodel and sell, making
a profit of up to 30%.
Factors involved in the valuation of a property

There are some factors involved in the production of income of a property,

derived these from the property itself, according to their physical
characteristics and the rights that the property represents. In some cases,
contracts made on a property can seriously affect the production capacity of
income from it. Other factors affecting income are the characteristics of the
land, buildings and other improvements, better use of land, in contrast to its
use, the quality of the type of building in relation to the earth, functionality,
etc ... also affect revenue, government policies and general economic
trends.
List factors affecting income:
1. With regard to land:
to. Location.
b. Lot Size and measurements.
c. Topography.
d. Soil and subsoil conditions.
and. Availability of services and type thereof.
2. In relation to construction:
to. Type of construction in relation to the batch.
b. Quality and durability.
c. Functionality.
d. Style and aesthetics.
and. Consistent with the neighborhood.
F. Services provided to its inhabitants.
3. Miscellaneous:
to. Property type (trade, housing, industry, etc.).
b. Quality in its kind.
c. Amount in its rate on the market.

4. Responsibilities
fiscal elements of real estate
This information was obtained in a specialized book on the subject
INVESTMENT IN REAL ESTATE: ANALYSIS AND EVALUATION OF REAL ESTATE

IN THE MEXICAN CONTEXT / DOMINIQUE ACHOUR, GONZALO CASTAEDA,

THE EDITORIAL LIMUNSANOREGA.
Depreciation and deduction of investments is an approximate measure of
the loss suffered by the property value by using the passage of time and the
annual depreciation in Mexico is 3% per annum from the date of acquisition
of the property.
In the case of the sale of real estate unitary tax rate on transmission local
domain and two federal tax rate on real estate purchase and apply i.s.r.
The property tax is once a year or every two months, varies according to the
state in which this property and proportional to the assessed value of the
property and the attached buildings.
The inflation adjustment is calculated on debts in the financial system as
banks, insurance and finance companies, credit organizations and brokerage
firm, and is used to calculate the value of an asset over a period of time.
The source was obtained from the Information Resource Center at CUCEA
where we draw the book "Real estate investments" by Dr. Achour as there
were many pages related to our topic but most gave more than anything
advice and figures did not understand, then this text in great detail general
concepts of real estate and especially explained, was our choice because it
was all in one place and was based on a case study of a company so that we
could better understand the real estate.
In section
real estate financing
We found that it depends more than anything else the credit. Each part of
the process feeds on mortgage funds. Given the size of this kind of financing
these types of investments are long term.
In mortgages, the value of the property is considered as loan collateral.
When making a mortgage they are evaluated and classified depending on
the category of credit according to the characteristics of the applicant,
according to the purpose of credit and depending on the type of property.
Since you have the kind of credit that is needed, there are different
financing systems, such as Mexican banks have designed repayment plans
with affordable monthly payments that simultaneously ensure the recovery
of credit in real terms. We also found:
traditional system
It establishes fixed terms and there is no need for additional credits because
the monthly payments include a portion of principal and all interest earned
in the month. Adjustments to monthly payments are based on the upward or
downward interest rates.
Adjustable payments system
The bank calculates the monthly payments by establishing a fee for each
million pesos initial credit granted, which is changed only every few months

according to the increase experienced by the National Index of Consumer

Prices (INPC) in the numbers of months prior to the review.

System factors
The loan is a fixed term contract; so it is necessary to distribute the
payment of debt throughout the lifetime of the loan. It guarantees both
accessible initial monthly payments, as a gradual growth of monthly
expenditures.
System portions
You also need to refinance the interest. Like the system factors the debt is
settled in a fixed term, although in this case the borrower chooses from
among several options, the growing pace with unpaid balances. If you opt
for a high growth rate payments, the outstanding balance will grow less and
the additional credit required will be less.
System social interest
They are classified into three categories according to whether the source of
funds
FOVI system
The main fund's resources come from the collection of commercial banks,
although these are complemented by the same recovery of loans and
contributions from international financial institutions (AID,
Operation together
Builders or developers who require financing for sale or multiple
construction make use of so-called credits set: bridge or promoter.
Both the bridge loan and credit promoter, funding is granted for multiple
construction of houses, offices, apartments and commercial premises in
condominium.

In the next section we have:

Measurements of investment profitability
Here the performance of real estate investments must be judged in relation
to the results of the annual operating and expectations have on the resale
value at the end of the holding period.
The value of the property and its annual revenues are estimated based on
anticipated cash flows, which are calculated based on certain assumptions;
and in relation to mortgage interest rates, the strength of the market, the
level of employment, the rate of inflation, competition, the value of the US
dollar.