Fred W. Prassas - Investment real estate: finance & asset management

Fred W. Prassas CPM

PROFESSIONAL REVIEW

Howard Campbell, CPM

Ken Goodacre, CPM

Enis Hartz, CPM

IREM EDUCATION PUBLISHING

Ron Gjerde
Vice President, IREM Knowledge Center

Nadia Geaga Pupa
Managing Editor, Publications

Dawn Brent
Editor, Content and Curriculum Development

Suzanne Hausknecht
Editor, Content and Curriculum Development

Fred W. Prassas CPM

2013 by the Institute of Real Estate Management
of the NATIONAL ASSOCIATION OF REALTORS

All rights reserved. First Edition.

Printed in the United States of America

10 9 8 7 6 5 4 3 2 1

ISBN-10 1-57203-173-5

ISBN-13 978-1-57203-173-9

Ebook ISBN 978-1-57203-174-6

This book or any part thereof may not be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher.

Inquiries should be directed to:

Publishing Department

Institute of Real Estate Management

430 North Michigan Avenue

Chicago, IL 60611-4090.

This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. Forms or other documents included in this book are intended as samples only. Because of changing and varying state and local laws, competent professional advice should be sought prior to the use of any document, form, exhibit, or the like.

This publication is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or any other professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought.

Cover Photo Jon Boyes

Graphic Design: Maria Loxas

Investment Real Estate: Finance and Asset Management differs from other real estate investment and financial analysis publications in that it focuses on the real estate managers role in ensuring that the real estate management companys clients realize their investment goals for any given property. Real estate managers today are more than property overseers who must manage the day-to-day operations of their clients properties; they also often are asset managers. Even if a real estate manager is not actively performing the analysis and management of a portfolio of investment real estate, he or she must have a basic understanding of the impact various decisions about a property have on the cash flow and value of a property. This book provides insight into the real estate management company and managers role in the financial analysis and asset management of a property. It also looks in detail at how to budget, forecast, and analyze cash flow.

This book flows from an overview and historical perspective of real estate finance and investment to accounting basics to valuation and financial analysis. Each chapter in this book provides detailed information about the chapter topic and may include the following additional content.

Useful Information

Various tips are provided throughout the book that point out key, or often overlooked, information.

Questions real estate managers may ask

Interspersed within the text are lists of questions that illustrate how a real estate manager may consider the concepts being discussed in real-life situations.

Each chapter ends with a list of review questions that you can answer to test your understanding of the content presented.

Special thanks to David Domres, CPM, architect of the IREM Financial Analysis Spreadsheet, a generous contributor, friend, and advisor.

Also many thanks to the subject-matter experts of the IREM finance and asset management series for their expertise, input, and contributions including: Steve Cary, CPM; Howard Campbell, CPM Emeritus; Bob Demson, CPM; Len Frenkil, CPM; Ken Goodacre, CPM; Enis Hartz, CPM; Yvonne Jones, CPM; Steve Kerens, CPM; Eric Storey, CPM; Pedro Vermales, CPM; and Kathy Whitman, CPM.

Thank you to the following individuals who contributed forms, data, information and feedback: Lori Berger, CPM; Joe Greenblatt, CPM; Mark Jossart, CPM; Nancye Kirk, Chief Strategy Officer/Vice President, Global Services IREM; Pamela Monroe, CPM; Richard Muhlebach, CPM; Regina Mullins, CPM; Peter Ogden, CPM; Marjean Pountain, CPM; and Robert Toothaker, CPM.

The content and curriculum development staff and editors at IREM including: Dawn Brent, Suzanne Hausknecht, and Nadia Geagea Pupa.

Fred Prassas, CPM

Fred Prassas, CPM is Assistant Professor and Program Director for the B.S. degree program in Property Management at the University of WisconsinStout.

He is a founding member of the PMC Management Group based in La Crosse, Wisconsin, which specializes in multi-family property management throughout western Wisconsin and eastern Minnesota. He has been in the real estate business since 1973 and is a licensed real estate broker.

Prassas was the 2006 president of the Institute of Real Estate Management where he is also an instructor of the finance and asset management credentialing courses.

In addition to volunteer leadership positions with IREM, Prassas has held leadership positions with the National Association of Realtors. In 2010 he was presented with NARs Distinguished Service Award, the highest honor bestowed upon a member by this organization of over 1,000,000 members.

Prassas is a member of the Board of Advisors of the James A. Graaskamp Center for Real Estate at the University of WisconsinMadison. He was president of the La Crosse Area REALTORS Association in 1985, president of the Wisconsin REALTORS Association in 1992, and was named REALTOR of the year by both organizations.

Prassas earned a Bachelor of Science degree in Communications from Southern Illinois University and a Master of Business Administration from the University of Wisconsin, La Crosse.

Investment Real Estate: Finance and Asset Management explores the major topics of financial analysis and asset management from the perspective of the professional real manager. Many successful real estate managers consider financial analysis to be a process that begins and ends with the annual budget . Budgets are indeed a critical component of the real estate managers role, and they will be explored in detail. However, the role of the real estate manager continues to evolve and become more complex. Real estate managers today work in widely varying business environments. Within those environments, client needs have changed, and the sophistication of owners continues to grow as knowledge and information become more readily available through experience, technology, and networking channels.