List and briefly describe the 5 steps in the framework for real estate investment analysis shown in Figure 18.1

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FIGURE 18.1 Framework for Real Estate Investment Analysis This framework depicts a logical 5-step procedure for analyzing potential investment properties to assess whether they are acceptable investments that might be included in one's investment portfolio. (Adapted from Gary W. Eldred, Real Estate: Analysis and Strategy.) 1. Set investor objectives. A. Investment characteristics B. Constraints and goals 2. Analyze important features of the property. A. Physical property B. Property rights C. Time horizon D. Geographic area 3. Collect data on determinants of value. A. Demand: Who will buy? 1 1 1 1 1. Economic base- population, wealth, income, etc. 2. Buyer (tenant) preferences 3. Target market potential 4. Mortgage financing conditions B. Supply: What are the quantity and quality of supply? 1. Market structure 2. Sources of competition 3. Inventorying competitors C. The property: What set of benefits should be provided? 1. Restrictions on use 2. Location 3. Site 4. Improvements 5. Property management D. Property transfer process: How will the property rights be transferred? 1. Methods of promotion 2. Negotiation pressures and techniques 3. Lease provisions