ELE 3736 Real Estate Finance


ELE 3736 Real Estate Finance

Responsible for the course
Knut Sagmo

Department of Financial Economics

According to study plan

ECTS Credits

Language of instruction

Since everybody needs a place to live, everybody is affected by real estate and the corresponding measures of valuation. The main focus of Real Estate Finance is the valuation and financing of different types of real estate properties ranging from residential (private) homes to commercial, income-generating investments. While analysis of residential properties typically focus on the cost of financing (borrowing costs), valuation of commercial real estate also depend on the income-generating ability of the assets in question. Securitization of real estate mortgages has - with various degrees of success - turned individual loan agreements into tradeable securities in world capital markets.

Learning outcome
Acquired knowledge
Upon completion of the course, students are required to master tasks such as:

  • calculating present values and internal rates of various cash flow streams
  • value fixed rate and floating rate debt securities
  • residential break-even analysis of costs
  • valuation and financing of commercial, rent-generating, real estate properties
  • disposition decisions regarding commercial real estate
  • portfolio analysis and risk adjusted rates of return for commercial real estate

Acquired skills
Students having completed the course are required to master tasks such as:
  • calculating borrowing costs from fixed-rate mortgages (FRMs) and adjustable-rate mortgages (ARMs).
  • estimating required rates of return on various types of real-estate investments
  • structure the financing suited to the various types of real-estate investments
  • demonstrate how derivatives may accommodate and/or modify exposure to risk.
  • analyse optimal holding-period for commercial real estate.

Upon completion of the course, students are expected to demonstrate attitudes characteristic of an uncompromising integrity towards the quality of analysis performed, ias well as information presented to clients and authorities.

BØK 3411 Finance and Managerial Accounting I, BØK 3421 Finance and Managerial Accounting II, BØK 1113 Managerial Accounting or EXC 3442 Managerial Accounting, BØK 1121 Finance or EXC 3451 Financial Reporting and Analysis or equivalent courses.

Compulsory reading
Brueggeman, William B. and Jeffrey D. Fisher. 2010. Real estate finance & investments. 14th ed. McGraw-Hill/Irwin. Ny utgave kommer i mars 2015

Recommended reading
Geltner, David M ... [et al.]. 2014. Commercial real estate : analysis and investments. 3rd ed., international ed.. OnCourse Learning. 250

Course outline
  1. Introduction to real estate economics
  2. Financial mathematics of real estate
  3. Measuring returns and investment performance
  4. Real estate valuation and investment analysis at the micro-level
  5. Real estate investment analysis of risk and the use of leverage
  6. Real estate development, land value and use of real-options
  7. Finding optimal holding-period for commercial real estate properties

Computer-based tools
Excel spreadsheets and basic statistical software.

Learning process and workload
The course consists of 45 lecture hours including instructor-guided problem solving in class. Allocation of studying-hours are suggested as follows:

Attendance in class
Problem-solving in class
Independent reading/preparation for class
Work assignments
Final exam preparation

During lecture series, three work assignments, posted on Its Learning, will be given. Three Home Assignments are also given during the lecture series. Further administrative details are provided in class.

A five hour written, individual and closed-book, exam concludes the course.

Examination code(s)
ELE 37361 Written exam counts 100% towards the final grade in ELE 3736 Real Estate Finance, 7,5 ECTS credits.

Examination support materials
No aids allowed except the BI-defined exam calculator TEXAS INSTRUMENTS BA Plus and interest rate tables.
Examination support materials at written examiniations are explained under examination information in the student portal @BI. Please note use of calculator and dictionary. https://at.bi.no/EN/Pages/Exa_Hjelpemidler-til-eksamen.aspx

Re-sit examination
Re-sit examiniation is offered at the next scheduled course.

Additional information