Modern REAL ESTATE Theory & Practice

PARTI Introduction

CHAPTER 1
Invitation to Real Estate 5
Section 1 Real Estate Activities 6
1. Real Estate and Human 6
2. Real Estate and Generations 7
3. Real Estate and Society 8
4. Real Estate and Careers 10

Section 2 Concept and Characteristics of Real Estate 11
1. Concept of Real Estate 11
2. Classification of Real Estate 12
3. Characteristics of Real Estate 14

Section 3 Real Estate and Academic Approach 17
1. Fusion of Real Estate and other Academics 17
2. Categories of Real Estate 18

PARTII Real Estate Theory

CHAPTER 2
Real Estate Market Theory 23
Section 1 Composition of the Real Estate Market 24
1. Meaning of the Real Estate Market 24
2. Classification of Real Estate Markets 25
3. Interaction of Real Estate Markets 27

Section 2 Demand and Supply of Real Estate 28
1. Demand 28
2. Elasticity of Demand 29
3. Supply 33
4. Elasticity of Supply 34
5. Equilibrium Price and Quantity According to Elasticity 36

Section 3 Real Estate Market Equilibrium 40
1. Market Equilibrium 40
2. Single Changes in Demand and Supply 41
3. Simultaneous Changes in Demand and Supply 42

Section 4 Principles of the Real Estate Market Operation 44
1. Structure of the Real Estate Market 44
2. DW Quadrant Model Principles 45
3. Effects of the DW Quadrant Model 47

Section 5 Efficient Markets and Allocation Efficiency 54
1. Efficient Markets 54
2. Efficient Market Allocation 58
3. Imperfectly Competitive Market 59
4. Information Cost and Real Estate Value 59

CHAPTER 3
Real Estate Economics 65

Section 1 Real Estate Economics 66
1. Significance of Real Estate Economics 66
2. Factors in Real Estate Economics 67

Section 2 Real Estate Economy Cycles 72
1. Characteristics of Real Estate Time Series 72
2. Cyclical fluctuation in Real Estate Economy Cycles 73
3. Honey-comb Cyclical Model of Real Estate 75
4. Cobweb Model in Real Estate Economics 78
5. Clock Model in Real Estate Economics 81

Section 3 Real Estate Economics and Industry 84
1. Real Estate Economics and Industry 84
2. Factors of Real Estate Industry Transformation 85

CHAPTER 4
Real Estate Policies 87

Section 1 Necessity of Real Estate Policy 88

Section 2 Problems of Real Estate 89
1. Physical Characteristics of Real Estate 89
2. Issues on Real Estate Supply 90
3. Other Issues on Real Estate 91

Section 3 Government Real Estate Policies 92
1. Government Intervention in the Market 92
2. Causes of Market Failure 93

Section 4 Policy Tools 97
1. Regulatory Measures 97
2. Direct Government Intervention Mechanisms 98
3. Indirect Government Intervention Mechanisms 100
4. Government Failures and Limits of Market Intervention 107

Section 5 Policy Measures 108
1. Regulation of Housing Prices 108
2. Regulation of Loan Limits 110

CHAPTER 5
Real Estate Location Theory 117
Section 1 Overview 118
1. Importance of Location 118
2. Changes in Rent Curves 119

Section 2 The Theory of Rent 120
1. Classical Scholars’ Theory of Rent 120
2. Neo-Classical Scholars’ Theory of Rent 126

Section 3 Urban Land Theory 129
1. William Alonso’s Bid-Rent Theory 129
2. Robert M. Haig’s Friction Cost Theory 130
3. Robert Hurd’s Land Value Theory 131

Section 4 Urban Spatial Structure Theory 132
1. Mononuclear Theory 132
2. Harris and Ullman, Multiple Nuclei Theory 134
3. Theory of Urban Spatial Structure 136

Section 5 Residential Location Theory 138
1. Rent Curve based on Income 138
2. Rent Curve based on Land Use 139

Section 6 Commercial Location Theory 141
1. William J. Reilly’s Law of Retail Gravitation Theory 141
2. Paul D. Converse’s Breaking Point Theory 144
3. David L. Huff’s Retail Location Theory 146
4. Walter Christaller’s Central Place Theory 148
5. Richard Lawrence Nelson’s Retail Location Theory 150
6. Edgar M. Hoover’s Cost Minimization Theory 151

Section 7 Industrial Location Theory 153
1. Alfred Weber's Industrial Location Theory 153
2. August Losch's Maximum Demand Theory 155
3. Harold Hotelling’s Locational Interdependence Theory 156
4. M. L. Greenhut's Profit Maximization Theory 158
5. Walter Isard's Substitution Principle Theory 160

Section 8 Types of Industrial Locations 161

PARTIII Real Estate Activities

CHAPTER 6
Real Estate Investment 167

Section 1 Real Estate Investment Assets 168
1. Overview 168
2. Methods of Real Estate Investment 168

Section 2 Time Value of Money 172
1. Interest Rates and Interest 172
2. Interest Calculation 174
3. Rate of Return, Discount Rate, Capitalization Rate 176
4. Conversion of Values 177

Section 3 Investment Feasibility Analysis 181
1. Rate of Return 181
2. Yield Rate and Investment Risk 184
3. Overview of Cash Flow 187
4. Calculation of Cash Flow 188

Section 4 Techniques Analysis of Investment 192
1. Discounted Cash Flow Analysis 192
2. Rule of Thumb Method 199
3. Ratio Analysis Method 201
4. Traditional Analysis Methods 204

Section 5 Risks in Real Estate Investment 207
1. Risks in Real Estate Investment 207
2. Measuring Investment Risk 209

Section 6 Portfolio 215
1. Risk in Portfolios 215
2. Mean-Variance Principles 216
3. Principle of Dominance 218
4. Risk Diversification in Portfolios 219

CHAPTER 7
Real Estate Finance 225

Section 1 General Overview 226
1. Introduction 226
2. Classification of Real Estate Finance 226
3. Interest Rate Structure 227

Section 2 Housing Finance 232
1. Mortgage Loans 232
2. Types of Mortgage Loans 232
3. Regulation of Mortgage Loans 236
4. Reverse Mortgage 239

Section 3 Financial Securitization 240
1. Mortgage Backed Securities (MBS) 240
2. Asset Backed Securities (ABS) 247
3. Project Financing (PF) 249
4. Project Financing Vehicle (PFV) 251
5. Joint Venture (JV) 252
6. Real Estate Investment Trusts (REITs) 253
7. Real Estate Collective Investment Scheme (Fund) 257
8. Real Estate Syndicate 260
9. Mezzanine Financing 260

CHAPTER 8
Real Estate Development 265

Section 1 National Land Development 266
1. Zoning Areas 266
2. Zoning Districts 269
3. Use Zone 271

Section 2 Real Estate Development 273
1. General Overview 273
2. Highest and Best Use of Land 274
3. Real Estate Development Process 275
4. Real Estate Development Stakeholders 280

Section 3 Classification of Real Estate Development 281
1. Classification by Development Type 281
2. Classification by Development Entity 295
3. Classification by Development Methods 298

Section 4 Feasibility Analysis of Development 300
1. Risk Analysis 300
2. Economic Feasibility Analysis 302

Section 5 Real Estate Development Finance 314
1. Characteristics of PF Finance 314
2. Structure of PF Fundraising 315
3. Securitization of PF Loan Receivables 316

CHAPTER 9
Real Estate Management 319

Section 1 Concept of Management 320
1. Matter of Terminology 320
2. Management by Composite Concept 321

Section 2 Real Estate Management by Business Type 323
1. Real Estate Management Tasks 323
2. Facility Management (FM) 324
3. Property Management (PM) 325
4. Asset Management (AM) 326

Section 3 Real Estate Management by Entities 327
1. Self-Management 327
2. Outsourced Management 328
3. Mixed Management 328
4. Trust Management 329

Section 4 Real Estate Management by Purpose 331
1. Residential Real Estate 331
2. Non-Residential Real Estate 333
3. Buildings and Facilities by Purpose 334
Section 5 Real Estate Leasing Management 335
1. Rental Payments in Lease Agreements 336
2. Tenant Selection and Screening 336
3. Negotiating Lease Conditions 339
4. Signing of the Lease Agreement 342
5. Establishment and Termination of the Lease 343
6. Lease Protection Laws 347
7. Alternative Dispute Resolution (ADR) for Lease Disputes 348

Section 6 Property Management by Lease Type 351
1. Residential Real Estate Lease Management 352
2. Commercial Building Lease Management 354
3. Office Building Lease Management 355
4. Industrial Real Estate Lease Management 356

Section 7 Basic Law on Real Estate Management 358
1. Laws for Safety Control and Maintenance 358
2. Laws for Multi-Family Housing Management 359
3. Laws for Management of Disasters and Safety 361
4. Laws for Fire Services 362
5. Laws for Fire Prevention and Safety Control 363

Section 8 Building Life Cycle 364
1. Building Life Cycle 364
2. Building Life Cycle Cost (LCC) 366

CHAPTER 10
Real Estate Brokerage 371

Section 1 Property Rights and Civil Act 372
1. Property and Rights 372
2. Possessory Rights 375
3. Ownership Rights 376
4. Superficies Rights 376
5. Servitude Rights, Easement 377
6. Chonse(Jeonse)gwon Right 378
7. Retention Rights 380
8. Mortgage Right 380
9. Pledge Rights 382

Section 2 Brokerage and Commercial Act 382
1. Real Estate Agent under the Commercial Act 383
2. Brokerage Fees under the Civil Act 384
3. Licensed Real Estate Agent Act 384

Section 3 Real Estate Contracts 388
1. Listing Contract 388
2. Legality of Contracts 391
3. Executability of Contracts 391

Section 4 Role of Licensed Real Estate Agents 393
1. Role of Real Estate Agents in Advanced Countries 393
2. Practical Real Estate Intermediation Stages 395
3. Role-based Intermediation Stages 397

Section 5 Real Estate Brokerage Practice 401
1. Illegality of Brokerage Roles 401
2. Compensation for Damages 402
3. Excessive Gifts and Miscellaneous Fees 403
4. Security Deposit Contracts 405
5. Illegal Structures 406

CHAPTER 11
Real Estate Consulting 409

Section 1 Basic Principles of Real Estate Consulting 410
1. Definition of Consulting 410
2. Meaning of Real Estate Consulting 410
3. Real Estate Consulting Services 411
4. Support for Real Estate Decision Making 414

Section 2 Real Estate Consultant 415
1. Capabilities of Consultant 415
2. Basic Activities 417