Question

QUESTION 15 List the four theoretical combinations of initial cost and cash flow low risk/high risk in real estate investments....give one (1) R E development example of each.

Answer 1

Theoretical combination of intial cost and cash flow are

• identifying risk at each stage of project
• allocating each risk to appropriate particpant
• Arrange guarantee to cover risk component
• optimizing your cash flow

low risk in real estate investiment are,

Risk can arise from different sources, depending on the type of investment, the circumstances and the industry in which the organization is operating. Some of the sources of risk are as follows

• project specific risk
• company specific risk
• industry market risk
• market risk
• compensation risk
• international risk
• risk due to economic conditons
• Market risk
• Liquidity risk
• Specific risk
• Interest rate risk.
• Foreign exchange risk
• Sovereign risk capital risk

high risk in real estate investiment are,

• 1. Rental Vacancies
• 2. Management Problems
• 3. Tenants Not Paying Rent
• 4. Unexpected Maintenance Bills
• 5. Rent Value Decline
• 6. Interest Rates Increasing
• 7. Lender Calling In Your Loan
• 8. Insurance Payment Delays
• 9. General Cash Flow Issues
• 10. Malicious Damage
• 11. Fire or Other Devastation
• 12. Loss In Value of Property
• 13. Major Repair Costs
• 14. Difficult To Sell
• 15. Expensive To Sell
• 16. Little Diversification
• 17. Property Not Helping You Achieve Financial Goals
• 18. Difficult To Access Equity
• 19. High Entry Costs
• 20. Litigation

redevelopment examples are,

1. Invest in Automation
2. Optimize Your Cash Inflow
3. Optimize Your Outgoing Cash Flows
4. Capturing more discounts from vendors through early payments.
5. Negotiating the best possible payment terms with vendors through contract negotiation and supplier relationship management
6. Making strategic upgrades to equipment and technology. The immediate costs will be readily offset by long-term value in the form of greater production capacity and efficiency, as well as lower maintenance and labor costs that free up more cash.