Anyone have a job related to real estate?

[DonkeysAlwaysDrw]

Was wondering if anyone had a job related to real estate such as mortgage broker, appraiser, property manager, real estate agent, etc and was wondering if you liked/hated it?

Also was interested in knowing if you felt this job that you have related to real estate really gives you an advantage in learning about how to invest in real estate.

I ask because I thought of trying to get a job related to real estate just for the purpose of learning the market and watned to know if this was worth while.

For example, I was thinking a job as an appraiser would be a great tool for being able to assess the value of potential pieces of property you want to invest in on your own.

[SteveOMS]

While I think a job as an appraiser is a good field and good money to make, probably not worth the whole effort to get certified and start working if your not going to see it though as a profession since you just want to invest on your own. I think you'd be better served being a agent (sales or rentals) or property management. I went into the real esate field without any experience but my business partner was a rental agent before which was very usefull to have all that knowledge.

SteveOMS

[sprmario]

I deal w/ appraisers all the time and, most are idiots. There are a few good ones that know what they are doing. The problem i have is that the way appraisers generally appraise has more to do w/ historical value vs. true market value.

[kevb81]

i work in real estate doing commercial mortgages...and you definitely learn alot..however, the best route would be an acquisitions type position ..these gigs are tough to land tho (i had related experience and still couldnt get a job in that role)..try working for a small/family-based company because you get to learn alot more about the different aspects..pay will prob be less but u will learn alot more

appraisal definitely gives you good understanding of valuation if u work with someone good..the ones ive worked with do understand what true values are and know that value is also a function of income and not only driven by historical value/replacement cost

if you go into property management, you will learn more of the hands on aspect and management (not really how to evaluate deals)..you also have to deal with a ton of headaches (especially if you are doing residential property mgmt)

[elus2]

[ QUOTE ]
The problem i have is that the way appraisers generally appraise has more to do w/ historical value vs. true market value.

[/ QUOTE ]

How would you appraise doing 'true market value'?

[kevb81]

hope this makes sense cuz im typing this up quick at work...

by definition, the true market value of a property is what the "market" is willing to pay for it under normal conditions (ie. not a distressed sale or transaction other an arms-length transaction)

the way that appraisers look at property to estimate the market value are cost approach, sales approach and income approach.

cost approach is not as heavily weighted in most markets today.its essentially the cost to replicate the property.

today, more focus is on the sales comparison approach and the income approach..the sales comparison will look at the price of recent transactions in the market to determine what properties are currently trading at..for example, for office space, it will look at the price per square foot (ie. a 100,000 sf property that sold for $10,000,000 was sold for $100 psf)..it will also look at the cap rate that people are paying for the property (cap rate is the income/price..essentially the return).

income approach is the method in which you look at the stream of cash flows and give it a value...its your typical discounted cash flow..you discount based on the expected yield..you should also use a reversion cap rate at the end(cap rate at which you expect to sell at the end of the hold period..its basically a termination cap)...this is the basics of it..there are many things that are adjusted tho to fine tune it..for example, a property with a "credit" tenant with a long lease will trade at lower cap rate and will require a lower discount rate (due to the lower risk)..you should also take into account market conditions (ie. market rents, is the property above or below market, market vacancy, new supply or demand generators which will impact the property in the future, etc)

i hope this helped and sorry if i was unclear on anything

[elus2]

[ QUOTE ]
hope this makes sense cuz im typing this up quick at work...

by definition, the true market value of a property is what the "market" is willing to pay for it under normal conditions (ie. not a distressed sale or transaction other an arms-length transaction)

the way that appraisers look at property to estimate the market value are cost approach, sales approach and income approach.

cost approach is not as heavily weighted in most markets today.its essentially the cost to replicate the property.

today, more focus is on the sales comparison approach and the income approach..the sales comparison will look at the price of recent transactions in the market to determine what properties are currently trading at..for example, for office space, it will look at the price per square foot (ie. a 100,000 sf property that sold for $10,000,000 was sold for $100 psf)..it will also look at the cap rate that people are paying for the property (cap rate is the income/price..essentially the return).

income approach is the method in which you look at the stream of cash flows and give it a value...its your typical discounted cash flow..you discount based on the expected yield..you should also use a reversion cap rate at the end(cap rate at which you expect to sell at the end of the hold period..its basically a termination cap)...this is the basics of it..there are many things that are adjusted tho to fine tune it..for example, a property with a "credit" tenant with a long lease will trade at lower cap rate and will require a lower discount rate (due to the lower risk)..you should also take into account market conditions (ie. market rents, is the property above or below market, market vacancy, new supply or demand generators which will impact the property in the future, etc)

i hope this helped and sorry if i was unclear on anything

[/ QUOTE ]

You've described the 2 methods real estate appraisers would use to come up with a value for their clients but you never actually described how to get 'true market value'.

Why wouldn't looking at comparables and adjusting for lot size and other variables give you a good enough estimate for 'true value'?

[kevb81]

theoretically, the only way to get a "true" market value is by putting the asset for sale ..whatever the property sells for in a reasonable amount of time with normal market conditions is the "true" value

looking at the income and what other properties are selling for will give you an "estimated" market value, which is what appraisers try to do

when looking at a longer-term investment in todays market, most ppl use the income approach to value the property..for more transitional/value-add situations, they are lookin at the sales approach

[elus2]

Yep I agree but would also add that since this would be very impractical for coming up with a valuation, that approximations to true value are generally good enough to work with for the majority of transactions requiring an appraiser first.