Principles of Real Estate Syllabus
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Harvard University Extension School Spring 2015 MGMT E-2035: Principles of Real Estate Instructor: Teo Nicolais SYLLABUS Instructor: Teo Nicolais, Owner Nicolais, LLC [email protected] (Tuesday Lecture Group) [email protected] (Wednesday Lecture Group) Class Meeting Time: 7:40PM – 9:40PM (See your registration for the lecture day) Class Format: Live Web Conference (online only, recordings available) Course Website: https://canvas.harvard.edu/courses/2074 Course Description and Overview “Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.” ~Warren Buffett This course is designed to provide practical skills for actively engaging in real estate investment. You will gain a working knowledge of the major components of the real estate industry, the mechanics of undertaking projects, the skills to develop financial models for investments, an understanding of how firms obtain capital for their projects, and how to manage enterprises. You will discover the various asset classes within the real estate industry and study the broad market cycles which lead to investment opportunities; develop the technical skills for creating financial models, analyzing cash flows, and measuring economic returns of real estate investments in Microsoft Excel; explore how to raise capital for real estate investments through debt and equity partnerships; learn the practical steps for putting together and operating real estate investment projects with an eye toward balancing or mitigating risk; and gain practical decision-making experience by working through real world investment situations. Course Format This live, interactive Web Conference Course takes place exclusively online using two of Harvard’s newest online platforms: Canvas and Blackboard Collaborate. Far from a traditional “course website,” Canvas is a state of the art learning management system. On the course’s Canvas site you’ll submit your weekly assignments, take your exams, and collaborate with your peers for your final project. The weekly lectures will take place live using Blackboard Collaborate, a web- conferencing platform designed specifically for academic settings. Teaching assistants will also hold weekly section meetings using Blackboard Collaborate to discuss the material in greater detail and offer office hours. For those of you new to the program, a "section" is like a mini-class that allows you to engage the material in a more intimate setting. Revised February 26, 2015 Page 1 of 8 Harvard University Extension School Spring 2015 MGMT E-2035: Principles of Real Estate Instructor: Teo Nicolais SYLLABUS Including lecture, section meetings, and assignments the time commitment for a typical week is expected to be around six hours. While attendance of lectures and section meetings is strongly recommended, attendance is not required. Recordings of all lectures and section meetings will be available on the course Canvas site. Weekly Assignments and Exams All weekly assignments and exams for the course will be completed online and submitted through the Canvas site. Weekly assignments are designed to have a high degree of instructional value: completing the assignments will help you work through the material and discover insights on your own. The time you are expected to spend on weekly assignment will vary but is typically about one hour. All assignments will be submitted online and are due at 11:59pm US Eastern on lecture day for the course in which you’re enrolled. We cannot accept late problem sets for any reason. To compensate for this policy, the lowest of their problem set scores will be dropped from each student’s semester grade calculation. There will be two exams. The first exam will cover the first five class sessions. The second exam will cover the second five class sessions. Both exams will be 60 minutes in duration and carry equal weight. They will be open book and are administered online. Collaboration on exams is not permitted. Final Projects One of the primary objectives of this course is for you to gain practical decision-making experience by working through investment situations. Toward that end, you will be forming a team of three to five students to analyze, structure, and present a real estate investment project with the goal of attracting lenders and equity investors. Your team will select a project from one of the major development types (residential for-sale development, multi- family income, office, retail, etc) of your choice. Presentations will include financial a project summary, market analysis, Pro Forma, and sensitivity analysis and will last fifteen minutes including time for question and answers from the audience. All students will play the role of lenders or investors as well: you will be assigned a quantity of capital to “invest” in one or more of the projects proposed (excluding your own). You will be investing your capital based on your assessment of the returns as well as your judgment of the sensitivity of the project to risk factors and the soundness of the plan. Graduate level students will be required to write a short response paper explaining their investment decisions. For the first round (April 28th) the course will be divided into several groups of teams (each team presenting to their group). The teams which attract the most capital from lenders and equity partners will present to the entire class during the second round on May 5th. The goal is to expose you to as many projects (and perspectives) as possible to give you a head start on future real estate and non-real estate investment decisions. Members of the winning team will earn a 5% bonus on their semester scores. Members of the second place team will earn a 2.5% bonus on their semester scores. Revised February 26, 2015 Page 2 of 8 Harvard University Extension School Spring 2015 MGMT E-2035: Principles of Real Estate Instructor: Teo Nicolais SYLLABUS Grading Your semester score will be automatically calculated using the weighting system below and you will be awarded the higher of the two scores: Assignments: 25% Assignments: 25% First Exam: 25% Second Exam: 25% Second Exam: 50% Final Project: 25% Final Project: 25% When calculating your semester grade, we will drop your two lowest Weekly Assignment scores. Also, while there will be a final project and second exam for this course you will find there is ample time between the two to prepare for the final (see the course schedule below). Letter grades will then be assigned according to the following fixed scale: Percentage of Semester Letter Grade Points A 93% A- 90% B+ 87% B 83% B- 80% C+ 77% C 73% C- 70% D 65% E/F 0% The percentages above represent the lower bound of the letter grade range. For example, a student who earned an 86.9% would receive a B for the course. A student receiving exactly 87% of semester points would receive a B+ for the course. Readings Floyd, Charles F. and Allen, Marcus T., Real Estate Principles, 10th Edition (Dearborn Real Estate Education, 2011). ISBN-13: 978-1-4277-2488-5, ISBN-10: 1-4277-2488-1 (“Floyd and Allen”). Peiser, Richard B. and Hamilton, David. Professional Real Estate Development: The ULI Guide to the Business, Third Edition (Urban Land Institute, 2012). ISBN-13: 978-0-87420-163-5 Note: While the above editions are recommended, prior versions of the both textbook are acceptable. Revised February 26, 2015 Page 3 of 8 Harvard University Extension School Spring 2015 MGMT E-2035: Principles of Real Estate Instructor: Teo Nicolais SYLLABUS Other Logistics Prerequisites: High school algebra. No prior real estate or finance background is required for this course. Technology: Sessions 8, 9, and 10 focus on using Microsoft Excel 2013 to create financial analysis. Having Microsoft Excel (versions 2013, 2010, or 2007) is STRONGLY recommended. Google Spreadsheets are an acceptable alternative. Previous knowledge of Excel is helpful but not required. Scientific calculator (one capable of handling exponents) would be helpful. Financial calculators are not required. Communication Outside of Class: Students are welcome and encouraged to ask questions of the teaching staff via e-mail outside of class. Our experience has been that our live discussions with the benefit of video, audio, and whiteboards (all of which are recorded and posted the Canvas site for later review) are incomparably more effective and efficient in answering student questions than e-mail. We encourage you to send us questions via e-mail and we will be glad to answer those questions *during the next section meeting.* Word of advice: keep a careful eye on the course calendar in the syllabus. Do not wait until the night before the weekly assignments are due start on them – if you want assistance from the teaching staff be sure to e-mail us **before the scheduled meetings** so we can answer your questions during the recorded sessions. Course Schedule Module I: Understanding Land Use and Urban Growth Week of Jan. 26, 2015 - Session 1: What is Real Estate? Course overview Special characteristics of real estate Who becomes successful real estate investors? How do they start? Readings: Floyd and Allen, p. 1 – 14, Peisner and Hamilton, p. 3 - 13 Week of Feb. 2, 2015 - Session 2: What Can You Do With Land? Forms of ownership and common restrictions Zoning and Product Types o Residential o Retail o Office o Industrial o Specialty: Hotels, Motels, Resources Weekly Assignment #1 Due: Introduce Yourself Readings: Floyd and Allen, p. 222-229, 242-258 Revised February 26, 2015 Page 4 of 8 Harvard University Extension School Spring 2015 MGMT E-2035: Principles of Real Estate Instructor: Teo Nicolais SYLLABUS Course Schedule (Continued) Week of Feb. 9, 2015 - Session 3: How Do Cities Develop? Market Driven Land Use: The Bid-Rent Curve Urban Growth Patterns o Concentric Circle Model o Axial Growth Model o Sector Growth Model o Multiple-Nuclei Growth Model Understanding a Neighborhood’s Life Cycle Understanding a Property’s Life Cycle Identifying Opportunities within Your Market Readings: Floyd and Allen, p.