What's New & What Happens

1.Reasons for debt financing in real estate transactions
(1)Diversifying investments and reduce overall portfolio risks.
(2)Leveraging or trading on the equity.
(3)Hedge against inflation.
(4)To save or release equity for other activities.

2.Role of financing in real estate transactions
(1)To serve as production credit to finance construction operations, i.e. construction loans.
(2)To facilitate purchase of finished products by buyers.

3.Motivations and objectives of owner-investors (contributing equity capital).
(1)Owner-occupancy.
(2)Income property (regular return).
(3)Capital gain.

4.Objectives of lenders-investors.
(1)A yield on capital invested
(2)The return of capital through the scheduled repayments.

5.Why does capital market exist?
Because, in any one period of time, some segments of the economy do not spend all of the income received in that period while other segments desire to spend more than they received or have accumulated, so there is a need for capital market to act as the trading organization for capital supply and demand.

6.Who are savers?
Economic units whose current income exceeds current expense.

7.Who are borrowers?
Economic units whose current expense exceeds current income.

8.Ways for savers’funds to borrowers.
(1)Direct contact with borrower.
(2)Contact with a borrower through a broker.
(3)Lend surplus funds to a financial institution or organization, which re-lends these funds to borrowers.