Recent Articles

Real Estate

One of the Real Estatelargest industries in the form of financial activity, real estate represents nearly 20% of the US economy.  It is broadly defined to include not only commercial and residential activity but farmland too.  This section of the website is devoted to the economic and business standards used in this vast industry.  As time goes on, I will divide this page into subsections including single family residential, multi family residential and commercial real estate.  For now, I will fill the space with articles related to this industry.  Please be aware, this will take almost a year to fill this section with enough information to divide the page into the three main areas of the real estate industry.

For now, enjoy the information and if you have questions, ask me by sending me an e-mail to dave (use the standard symbol) businessecon.org, I’m trying to prevent spam.  Act on Knowledge.

  • Apartment Complex Profit and Loss Statement – (Revenue Section) Best Presentation Format

    In the apartment complex industry I have had the privilege of reviewing four different presentation formats prepared by different Certified Public Accounting Firms.  Interestingly enough, they were all distinctly different.  But one stood out!  It made much more sense than the others.  One of the other three had an interesting subsection and so I combined ...
  • Don’t Flip Them, Finance The Flip!

    The rage in real estate for the last 15 years has been flipping houses.  Simple principle of buy low, fix it up and sell high – House Flipping Business Dynamics.  What if I told you there was more money to be made with less risk and very little work if you simply financed the deal?  ...
  • Financial Leverage in Real Estate

    Financial leverage refers to using a third party’s money to increase profit for the borrower.  In real estate the profit or equity in the property is the weight being lifted by the use of a lever (borrowing money) on the fulcrum (the property).  The more borrowed (longer lever) the easier and faster it is to ...
  • Flipping Houses – Proper Inventory Turnover Rate

    Turnover Rate with Flipping HousesIn your typical business operation, turning the inventory over as often as possible has several benefits.  First, it generally reduces overall costs, secondly, it generates greater profits and third, by increasing the profitability, the company has a greater return on equity.  OK, this seems all well and good, but does turning the inventory over in ...
  • House Flipping – Business Dynamics

    There is a lot of misinformation about flipping real estate on the internet and on television.  I’m mostly shocked by the lack of detailed information related to the entire cost of the project and the adjusted sales price.  I have yet to read a single article that goes into the details of the business dynamics ...
  • Landlord – Business Dynamics and Economics

    I love the game of Monopoly.  My sons enjoy playing it too.  But we all have the same complaint about the game; it takes forever to accumulate all the wealth and ultimately win the game.  Being a landlord means the same thing.  It will take a long time to accumulate wealth.  So for those of ...
  • Real Estate Agent – Drawbacks and Delusions

    Real Estate AgentThe highest prized benefit of owning your own business is independence.  You rely on your skills and have to report to no one but yourself.  This is the allure of becoming a real estate agent.  Imagine, making a lot of money and working when you want to work.  Very appealing to just about anyone, wouldn’t ...
  • Real Estate Investment Trusts – REITs

    Real Estate Investment Trusts are corporations, trusts or associations that act as agencies in real estate and associated mortgages. This is a specialized tax segment and it requires recognition by the Internal Revenue Service to operate as a Real Estate Investment Trust (REIT).  In general, the REIT pays little to no income taxes and acts ...
  • Real Estate Syndication

    Have you ever wondered how apartment or office complexes are financed?  A typical complex will have 80 to 100 units and the cost of construction will approximate $7,000,000.  So where does this money come from?  Your average person will think it is financed by a mortgage of some sort.   Well, this is partially true, but ...
  • Replacement Reserves- Understanding the Fundamentals

    Long term and short term housing rental businesses use a financial operations tool to maintain, repair and upgrade the physical facilities.  This tool is known as replacement reserves in the real estate industry.  In almost all cases it is a contractual agreement requirement between the mortgage lender and the borrower.  The financial arrangement between the ...