Real estate

Marilyn: Well, I’ll talk to Richard about it the minute the comes homeandwe’llgotoseeher.Andthanksfortheadviceaboutthehouse.

Ellen: And remember, we love having you here. There’s no need to rush.

Richard and Marilyn are thinking about buying a house. What things about their situation and Ellen and Philip’s situation years ago are similar? Write four similar things.

Ellen gives Marilyn some advice. Which of the following does she make to Marilyn?

Look at some houses. Save more money. Find better jobs. Look in the newspaper. Go to a bank.

Call a real-estate agent. Do not rush to buy a house. Move far from the city.

Unit II: PLANNING

Look at what advice some people gave about choosing an area to live in. Match the first part of each sentence 1—4 with the second part A-D.

1.Being near а hotel isn’t so important.

2.It’s nice to have a friendly restaurant nearby. З. You should find out.

4.It’s good to be near the shops.

A.If you suddenly realize you need bread.

B.For times when you don’t want to cook. С. What sports you can do in the area.

D.If you have your own home.

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Here are some more opinions about where to live. Choose the correct alternative: A or В, to complete each sentence.

1.In my opinion, _______is the most important thing. Aliving near your school

B your home near your school

2.If you live in а flat or only have a small garden, ________to live close to a park.

Ait’s almost important B it’s quite important

3.Personally, _________being near a cinema is very important because you can watch DVDs at home.

AI’m not thinking B I don’t think

4. What do you think about the importance ________near restaurants?

Ato live B of living

5.How important are sports facilities from your _________? Apoint of view

B opinion

Think of different ways to complete these sentences about your town. When you have decided on the best way, write your answers in the spaces.

1.Some people live in _______________________________.

2.The majority of people live in _______________________.

3.The worst kind of housing is ________________________.

4.Probably the worst problem with housing is ____________.

5.Another difficult problem is_________________________.

6.The most urgent thing to do is _______________________.

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Thinkaboutyouridealhouse– thehouseyou’dmоstliketolivein. Try to draw this house. Can you write a short description of

your house?

-Imagine where it would be.

-What would you see from the windows?

-What would it be like inside?

-How many rooms would it have?

Complete this sentence in as many ways as you can.

In 20 years’time, I expect that houses _________________

Text A: THE CONJOINED TWINS

OF REAL ESTATE

residential real estate – жилая недвижимость to enjoy increase – увеличивать(ся)

double digit – двузначный

to contend – утверждать, заявлять to achieve – достигать

underperformance – слабая активность

performance – работа, функционирование, интенсивность supportive – зд. благоприятный

to agree – соглашаться core – основной engine – двигатель

interest rate – процентная ставка property assets – недвижимое имущество distinct – отдельный

undeveloped – незастроенный rental – сдаваемый в наем

to evaluate – оценивать

in the appropriate way – соответствующим образом asset – статья актива

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capital gains – доходы от прироста капитала (как результат роста рыночной стоимости активов)

to purchase – покупать, приобретать either… or… – или…или, либо…либо at a profit – выгодно, с прибылью

to hold – владеть, иметь; быть владельцем

maintenance – стоимость содержания, техническое обслуживание

carrying costs – текущие расходы (затраты, издержки) tax – налог

income – доход(ы), прибыль the only – единственный resale – перепродажа

long-term investment – долгосрочные инвестиции in the mean time – тем временем, между тем

in terms of – с точки зрения; в отношении; в аспекте versus – против; в сравнении

opportunitycost–издержкинеиспользованныхвозможностей to tie up – консервировать; затормаживать; не давать ходу cash flow assets – текущие (ликвидные, легкореализуе-

мые) активы

fixed costs – постоянные издержки (затраты)

mortgage – ипотека; залог; заклад; ссуда под недвижимость leverage – “принцип рычагов”, соотношение между соб-

ственными и заемными средствами; использование заемного капитала (для увеличения прибыли)

cash flow – движение денежной наличности; движение ликвидности

in excess of – больше, сверх negative cash flow – негативное движение наличности (пре-

вышение наличных выплат над поступлениями) over the near – term – в ближайшем будущем

overpriced property – недвижимость по завышенной цене

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to drain – выкачивать, истощать to allow – признавать, считать

to foreclose – лишать права пользования

tostick (stuck) – испытывать затруднения; становиться в тупик bulk of profits – большая часть доходов

capital gains – доходы от прироста капитала (как результат роста рыночной стоимости активов)

toincur – принять на себя (напр. расходы); потерпеть убытки to offset – компенсировать

premium price – цена с надбавкой; цена выше номинала regardless of – независимо от, не считаясь, принимая

во внимание

tax shelter – средство уменьшения налога deductibility – возможность вычета (удержания) mortgage interest – процент по закладной collateral – залог

lender – кредитор tax-deductible – с возможностью вычета процента из сум-

мы облагаемого дохода

propensity to consume – склонность к потреблению; доля потребления в доходе

misplaced – неуместный, несвоевременный to tap – вытягивать, выуживать, выкачивать to capture – завладеть

inflated prices – вздутые цены

net cash – чистый платеж наличными

cast out – нехватка (отсутствие) наличных денег healthy increase – существенное увеличение net worth – собственный капитал

at best – в лучшем случае

hedge against inflation – гарантия от инфляции

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The hottest topic in money these days is undoubtedly real estate. In many areas residential real estate has enjoyed double digit price increases over the past several years.

Understandably, most real estate industry sources contend that real estate is now achieving fair value after years of relative underperformance and is likely to continue strong performance because of supportive demographic trends. Almost everybody would agree that real estate is one of the core engines of economic growth.

As any realtor will tell you, all real estate markets are local, but all local markets are heavily influenced by macroeconomic conditions such as interest rates and demographics.

The Home as a FinancialAsset

Property assets can be divided into three distinct categories: undeveloped land, owner-occupied, and rental. Each has specific financial properties and must be evaluated in the appropriate way.

Undeveloped or raw land is a capital gain asset. It is purchased with the intention of either developing it or selling it in the future at a profit. Raw land is easy to hold. It requires little or no maintenance and has negligible carrying costs (taxes on гaw land are usually very low). Raw land typically generates no income, so the only way to profit from raw land is to sell it for a profit. Raw land for resale is typically a very long-term investment.

Many fortunes have been made by purchasing lands in areas just outside cities and waiting for growth to extend cityboundaries into to undeveloped areas. But this may take decades and there may be more productive use of those funds in the mean time. Raw land investment must be evaluated in terms of the potential capital gains on the future sale of the property versus the opportunity cost of tying up that capital for many years.

As opposed to raw land, rental property is a cash flow asset.All developedpropertyhascarryingcosts.Theseincludemaintenance,

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insurance, property taxes, financing, etc.These costs are relatively fixed and unavoidable. Most rental property carries a mortgage. The mortgage creates leverage that allows the property owner to utilize a relatively small amount of capital to purchase expensive rental property. The mortgage is usually the largest fixed cost in a property.Agood rental property generates cash flow in excess of its carrying costs. Some owners purchase properties that have carrying costs in excess of rental income. This is negative cash flow and is very dangerous. These owners are speculators who are expecting the price of the property to rise over the near-term so it can be resold to another speculator for a profit. If the price does not rise, these owners are in a difficult position. They are stuck with an overpriced property that is draining capital and is typically either sold at a loss or allowed to foreclose. In rental property, the bulk of profits are expected to be from cash flow, capital gains are an added bonus.

Owner-occupiedrealestateincursallofthecostsassociatedwith any other developed property. All of the maintenance, insurance, taxes, and financing costs incurred by rental property also apply to owner-occupied property. However there is no corresponding income generated from the property to offset those costs. Owneroccupied real estate is a pure expense. Whether rented or owned, housing always costs money. If it costs less to own a home than to rent a similar property, then it makes sense to own. For most homeowners, their property has value far in excess of its market price.Quality-of-lifefactorsmayleadsomepeopletopaypremium prices for homes regardless of the financial considerations. An owner-occupied home has many valuable financial characteristics. It offers tax shelter due to the deductibility of home mortgage interest. It also represents collateral to a lender which allows the owner access to low-cost credit that may also be tax deductible.

Most homeowners expect the market value of their property to rise over time. Higher real estate values give homeowners a sense of wealth that is often reflected in a greater propensity to consume.

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But this feeling of enhanced wealth is somewhat misplaced. It is true that higher real estate values can be easily tapped and spent, but this does not mean that homeowners have greater real wealth. People always need somewhere to live. If a homeowner attempts to capture the capital gains in a primary residence by selling it, that person must find another residence at equally inflated prices. To realize net positive cash on the sale of a primary residence, the hоmеоwnеr must purchase a less expensive replacement home, rent a residence, or go deeper into debt. All of these cash-out options imply a lower standard of living.

The economics of home ownership is clear. Although homeowners experience a healthy increase in their nominal net worth over time, any attempt to use that wealth for other purposes willresultinalowerstandardofliving.Atbest,aprimaryresidence is an excellent hedge against inflation. It is not a good source of capital gains. Any gains realized from the sale of a primary residence will usually be consumed by its replacement.

Ex.1 Give Russian equivalents:

the hottest topic in money; fair value; is likely to continue; because of; demographic trends; to be heavily influenced by; specific financial properties; with the intention of; to profit from raw land; this may take decades; as opposed to raw land; insurance; to expect the price of the property to rise; an added bonus; an owneroccupied real estate; regardless of the financial considerations; the feeling of enhanced wealth; to go deeper into debt; a lower standard of living; any attempt to use smth. for other purposes; a source of capital gains.

Ex.2 Give English equivalents:

самая злободневная тема в финансовой сфере; взаимосвязанные структуры рынка недвижимости; за последние несколько лет; продолжать стабильно развиваться; основной

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двигатель экономического роста; оценить соответствующим образом; в будущем выгодно продать; неокультуренная (незастроенная) земля (2варианта); покупать землю за городом; относительнонебольшаясуммаденег;перепродатьимущество;иметь смысл; цена намного выше рыночной; ожидать, что стоимость имущества со временем вырастет; (при)дать ощущение возросшего благосостояния; прибыль от продажи первичного жилья.

Ex.3 Answer the following questions:

1.What is the hottest topic in money these days?

2.Due to what factor is real estate achieving fair value now?

3.What conditions are all local real estate markets greatly influenced by?

4.What categories can property assets be divided into?

5.Why is raw land easy to hold?

6.What do carrying costs include?

7.What property carries a mortgage?

8.Why do most homeowners expect the market value of their property to rise over time?

9.Is primary residence a good source of capital gains? Why?

Text B: DEMOGRAPHICS

housing demand – нехватка жилья to consume – зд. pаскупать housing – жилищный фонд

tobid (bid,bid)–приниматьучастие(вторгах);предлагатьцену influx – приток; наплыв

to come of age – достичь совершеннолетия

to relish – получать удовольствие, наслаждаться beneficiary – бенефициар (получатель доходов от имуще-

ства, находящегося в доверительном управлении) transfer – передача в собственность

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to inherit – наследовать, получать в наследство to enhance – повышать (качество)

on the surface – внешне, с внешней стороны

on careful examination – при внимательном рассмотрении (вопроса)

net – общий, конечный; чистый most likely – вероятно

to take over – перенимать, наследовать positive force – положительный фактор

Immigration has certainly been an important source of housing demand. The US huge wave of immigrants into the US from all over the world during the 1990s has consumed a large amount of housing. This could be identified as major cause of real estate inflation during that period of time as more and more people bid for a limited supply of housing. However, it is difficult to believe that this influx of immigration will continue far into the future. The children of the Baby Boom generation are now coming of age. They will leave their parents homes to form new households by the millions and comprise the bulk of future demand for real estate. This new generation has already been given unprecedented access to capital for purchasing homes. It is not unusual these days to have young people buying homes right after starting their first jobs out of college. Many young people, however, relish their freedom and choose to rent for long periods of time until they decide to settle down and have families. Since a large number of young adults already own homes, future demand from this generation will be weaker because it is already partially spent.

The Baby Boom generation will be the beneficiaries of the greatest transfer of wealth in history as they inherit the assets of their parents. These assets will typically include the parents’ home. People who inherit significant wealth typically use some of that wealth to enhance their standard of living, which may mean

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