University of Indianapolis
School of Business
Real Estate Finance
This handout outlines items presented verbally at the beginning of this course and during recent classes. This course project will involve you the student in a research activity to gain a better understanding of purchasing and financing real estate property.
The purpose of this project assignment is to provide you an opportunity to further explore a specific area within the world of real estate finance of your choice. This is designed to supplement your readings within our textbook, our discussions and lectures.
Your assignment is obtain a fellow class student as a “project partner” and to locate a residential or commercial property that is “currently” available for sale. You need to choose a property in the greater Indianapolis, central Indiana region. The purpose of this is that for this assignment you will need to visit the property. When traveling to your property it is recommended that you visit your property with at least one or two other classmates. This will increase the learning experience. Remember each student “project pair” needs to select a separate property, thus no duplicate subject properties can be used. Though the “Flip this House” option requires photos of your subject property, the overall assignment requires at least a front; rear and side yard exterior photos with at least 6 interior photos as well. These interior photos should include: the front foyer/entry area, main living/family room, kitchen, master bedroom, master bath and at least one guest bath.
If you are planning on selecting a property that is located in Indianapolis and/or with in the surrounding counties the Metropolitan Indianapolis Board of Realtors (MIBOR) will be a good source for information (search MIBOR.com). Additionally there are various on-line sites such as Trulia that may be useful as well. (www.trulisa.com/IN/Indianapolis) (or Zillow) They may have some commercial properties listed for sale as well. If you decide to research commercial real estate then you can select a commercial real estate brokerage office to locate a property. The Indianapolis Business Journal Book of Lists would be a good place to start to locate a commercial broker for your contact on locating a commercial property.
After you have selected a property for your project describe the steps that you would take to “acquire/buy” this property.
Include the following items:
Project – Subject Property Description:
- Describe the property “location” description including legal description and street address.
- Write a description of the property; describe any improvements, easements, and encroachments.
- Obtain a multiple listing sheet (the MLS) from the listing agent/broker and include in your report. Tell the listing agent/broker that you are also required to obtain the sales history print out of the property.
- Describe the current and past uses of the property. Describe what would you plan to do with it (repair, renovate, rent, flip, move in, etc.) if in reality you actually bought it?
- Present asking price?
- Price in which you believe you could buy this property for (consult the real estate agent/broker).
- What is the current zoning classification and requirements for this property? Check with your broker and/or county government offices.
Subject Property Project Financials: (include and describe within your report)
- Financing available?
- Describe the financing method(s) you would use to buy the property (you choose):
- Seller financing
- Land contract
- 15 year mortgage loan – if you choose this option, note the amount you would save over a traditional 30 year mortgage loan
- 30 year mortgage loan
- Mortgage Banker
- Mortgage Broker
- 40 year mortgage loan
- Fixed rate
- Adjustable rate (ARM)
- Down payment
- Balloon payment
- Describe and list “all” of your mortgage calculations
- List your monthly payment (principle and interest)
- If you choose a commercial property you would need to describe:
- What would be the projected “cap” (capitalization) rate?
- What would be the projected (annual) income for this property?
“Flip this House” – Extra Credit Addition – (OPTIONAL): For those of you who have chosen to select a residential property for their project and want to earn extra credit this option may be for you. This additional (for extra credit) portion of the course project would involve the student completing all of the steps of the original portions of this project plus a renovation stage. The next step would then be to describe what it would take in work, investments and financing methods to repair, renovate and/or update the dwelling. The goal of this repairing and updating is to improve the subject dwelling so that it is more appealing to a future buyer, while returning the greatest amount of profit per your “projected” investment. Your selected project property must be located in central Indiana due to the detailed nature of this “optional” assignment. Your professor may choose to visit your selected “Flip this House” property.
PLEASE NOTE: FOR THIS OPTIONAL PORTION OF THIS COURSE PROJECT YOU MUST SHOW YOUR PROFESSOR THE “MLS” SHEET AND THE SALES HISTORY PRINT OUT IN ADVANCE DURING OFFICE HOURS AND RECEIVE “PERMISSION” TO SELECT THAT PROPERT AND TO PROCEED WITH THIS OPTIONAL PORTION. This is not just a “re-decorating” assignment, this is to estimate what repairs, updates and associated costs/expenses (further investments) must be “physically made” to get this house ready to sell at a profit.
FOR THE “FLIP THIS HOUSE OPTION” YOU MUST INCLUDE THE FOLLOWING ITEMS:
- Descriptions of the following areas including the condition of these areas at the time of the walk through (thus you would need to visit the property in person, possibly multiple times – and take pictures and include them in your report and in class presentation) – (write these features into your report):
- Exterior – Include the type of siding (brick, stucco, vinyl, aluminum, or wood clapboard, etc.) the type of roof material (asphalt shingle, metal, slate, etc.), type of windows (wood, vinyl, wood/vinyl or aluminum clad)
- Exterior features including landscaping (wood deck, screened porch, concrete patio, built in grill, detached outbuildings, detached garage, etc.)
- Interior – Include description of the floors, walls and ceiling of all rooms
- Photographs – Include photographs in your report and your Power Point presentation of the following items:
- Exterior photos of the front, rear and side views of the dwelling, garage, any out buildings and views of the lot (front, back, sides) – Minimum – these are a must…!!
- Interior photos of all rooms including:
- Foyer, living room, dining room, kitchen, dinette, all bathrooms, all bedrooms, hallways, basement and garage – Minimum
- Repairs, renovations and updating:
- Describe what you would want to do for this portion in a room by room process:
- List the type of improvements that you would do.
- Here are some examples of typical repairs, renovations and updating (not just “redecorating” or buying furniture):
- Living room – Remove wall to wall carpeting, sand and refinish existing hardwood floors, repair broken window glass in patio French doors (right side), paint all walls medium taupe/tan, paint all wood trim light beige
- Dining room – Clean wall to wall carpeting, install wood chair molding trim, paint all walls and trim to match living room
- Master bedroom – Install new wall to wall carpeting, scrape and remove “popcorn” style sprayed ceiling treatment, then sand and paint – ceiling white, paint all walls – light taupe/tan, paint all wood trip light beige
- Landscaping – Repair 2’ crack in rear patio, remove the two overgrown shrubs near the front porch and replace with 3’ juniper bushes, add mulch to all planting beds, trim maple tree next to garage, replace mailbox
- Describe the costs involved with your repairs, renovations and updating:
- Price quotes can be obtained from flooring/carpet stores, home improvement stores, and /or sub-contractors and must be included in your report for credit. You must list your quotes as a part of your reference section or no credit will be given for the “repairs, renovations and updating” section.
- Describe what you would want to do for this portion in a room by room process:
- Marketing Price Point:
- What will be your new “listing” price?
- Describe how you arrived at your new “listing” price – You must list how you arrived at your price, just do not decide upon a figure. Talk with real estate agents, brokers, appraisers, etc.
- Resale Marketing Strategy:
- Describe what steps you would do to now “sell” your repaired, renovated and updated property
Project Report Structure:
- Approved topic – Add your project property “street address” to your sign-in sheet
- See your professor for this date
- Use APA style
- 4 – 5 pages maximum – First Portion
- 6 – 15 pages maximum – First and Second (Option) portions
- Cover page
- (4 – 6) Points supported by your research and interviews
- Comments – (At least four to five key points of knowledge that you walked away with. – “What was the most important thing(s) that you learned.”)
- At least 4 references for regular report with at least 8 for the “Flip this House” option.
- At least 2 interviews (at least 6 for Flip this House) – Individuals currently working within your topic area
- Prefer at least 1 interview to be conducted in person
- Your interviews can be with real estate agents, brokers, appraisers, home inspectors, and mortgage bankers and brokers, etc.
- (A great networking opportunity…!)
- Sources – list all our publication sources
- Prefer at least 1 interview to be conducted in person
“Pre-Report” Outline: Due in class Wednesday, April 13th
Prepare a one page outline and note:
- Subject property with address and legal description
- Commercial or residential status
- Why you selected this property
- What you hope to gain from this project
- Anticipated people to be interviewed and at least one of your references.
- Attach the MLS sheet
- Will you do the “Flip this House Option”?
Full Report Due:
Monday, April 27th – turn in just before your presentation
Please be prepared to give a verbal presentation to the class about your paper. Your presentation should be within 5 minutes in length. Allow time for questions. If you choose the “Flip this house” option then you will have the option of presenting up to 10 minutes maximum. I will be seeking a class volunteer to act as our timer. If you run over your allotted time for your presentation you will be asked to end your presentation immediately and thus will not receive credit for material not yet presented verbally.
Power Point Slides – Between 5 – 10 slides are required for the regular report and between 10 – 20 slides total required if you choose the “Flip this House” option. Include all of your photos that you have used within your written report.
*PRACTICE YOUR PRESENTATION AT LEAST TWICE BEFORE YOU PRESENT IN CLASS. PRESENT TO ONE PERSON WHO IS NOT IN OUR CLASS FIRST AND THEN TO ONE PERSON WHO IS IN OUR CLASS SECOND.
This individual course project is worth a total of 100 possible points.
The “Flip this House” option is worth “up to” an additional 50 points.
The student should approach this presentation as if they are presenting a real estate sales proposal to a group of private investors. Thus, dress code should be at least business casual.
The usual computer and projector will be in our room for your use. PLEASE BRING YOUR PRESENTATION ON “AT LEAST 2 JUMP/.THUMN DRIVES”. In the past we have had too much time wasted for students trying to connect to an “on-line” source to retrieve their Power Point Presentations. I WILL DEDUCT POINTS FOR THIS.
Also you are required to have handout materials for your fellow students (remember that you are making a presentation to a group of investors). This material should include copies of your MLS sheet, sales history print out, copies of photos, and a summary of what you are trying to accomplish. Prepare the appropriate amount of handout materials as needed.
(YOU WILL HAVE A GRAND TOTAL OF 5 MINUTES (or up to 10 minutes with the second extra credit option) FROM THE TIME YOU STEP TO THE FRONT OF THE CLASS TILL THE TIME YOU SIT DOWN, ALLOW TIME FOR Q &A.)
It is recommended as noted above that you practice your presentation in a complete dry run with a fellow student of the class. This will allow you to fine tune your presentation while gaining feedback from a peer.
Remember this presentation is worth 25 possible points.
PROJECT TIME MANAGEMENT: Please note that this report is designed to be challenging, but not impossible and you should expect to put forth a very strong effort. This is the “rigor” that will be present and you should expect to plan out your project well in advance and manage your time well. Your overall project grade will be based upon how well you perform this assignment and cover the details and questions as outlined above. Please note that the real estate professionals that you will be relying on to assist you with this assignment are very busy people who often earn their living through commission sales, much like a real estate professional that you may hire to assist you with a regular real estate business transaction…do not waste their time and do not expect them to help you out last minute.
PLAN WELL IN ADVANCE..!!
THIS PROJECT SERVES AS YOUR FINAL EXAM.
Questions and Assistance:
If you have any questions or problems please contact Ron Dow at 317-788-6166 or schedule an office hour appointment through the mini-URL listed on the course syllabus. If you have difficulty with this please see Ms. Liz Dant at Esch Hall, Suite 033. .
In the past most students have really enjoyed this project and gained a tremendous amount of knowledge from this experience. Overall this is a great opportunity for you to “apply” what you have learned through your readings, our lectures/discussions, and the home show, past assignments, guest speakers and from your real life experiences as well. This is also a great time to meet and network with professionals in the industry.