The necessity of office space was at one point unquestioned and tenants were readily available. Space considerations were for the most part limited to whether the location was large enough and had enough amenities or services to meet the tenants needs. Leases were easy to enter, easy to renew and easy to understand. For owners, office properties offered many of the benefits of owning a commercial property with fewer of the complexities that come with other property types.
Friday, July 21, 2023
Is the American Office Market Dead?
Tuesday, June 20, 2023
The Connection Between Banking and Real Estate in 2023
Saturday, January 1, 2022
2021: What A Year
2021 marked 10 years since I published the first post on this blog. At the time I was real estate agent and teacher who was about to begin law school and was looking for ways to better understand real estate modeling and real estate finance. I hoped to create a community of like-minded people so that we could explore ways to better value real estate properties and mortgages and discuss the market. Ten years and many experiences later this blog has grown and transformed into a general forum on all things real estate and I am amazed at the direction it has taken. 2021 has been an amazing year for TRET, so let’s take a look at the year in review.
Thursday, August 12, 2021
Improvement Options You Should Consider to Increase the Value of Your Home
Wednesday, July 14, 2021
Press ‘Home’ — Selling Properties With Smart Tech
Please enjoy this article from guest author Suzie Wilson of Happierhome.net
There are many advantages to home automation:
ease of use, better accessibility, and let’s face it — there’s something cool
about a fireplace that starts up when you clap. What you may not have foreseen,
however, are the benefits that technology provides when selling a property.
The Role of Tech
Sunday, March 21, 2021
How to Navigate Legal Structures in Real Estate

Monday, November 30, 2020
Let’s Not Forget the Expenses
Friday, July 27, 2018
How To Approach A Defaulting Second Mortgage
Monday, July 23, 2018
Real Estate Asset Managers

Friday, May 27, 2016
Monte Carlo Mortgages

Sunday, May 8, 2016
Why Historical Beta Does Not Always Work For Real Estate

Saturday, January 24, 2015
Who Should Value the Property: BPO's Versus Appraisals
Thursday, January 15, 2015
Return on Equity
Friday, January 9, 2015
IRR: Its Meaning, Its Uses, Its Benefits, Its Limitations and Capital Accumulation
Wednesday, December 31, 2014
Net Present Value, Discouted Cash Flow, and Profitability Index: Their Uses, Benefits and Drawbacks
Friday, August 5, 2011
Residential Mortgage Backed Securities: How They're Supposed To Work
Tuesday, July 26, 2011
Capitalization Rates: Prespective on Their True Meaning
I recently found a paper written for the Journal of Real Estate Research that explains the components of cap rate. It explains that cap rates are significantly influenced by the debt and equities markets, but contain significant time lags, given the illiquidity of real estate. The paper asserts that there are 4 components to a cap rate: the risk free rate (here measured by 3 month treasuries, usually measured by the rate of 30 yr. treasuries); a component composed of the market cost of debt divided by the property value (let's call it the property's market LTV) and the spread of a BAA rated bond (lowest possible investment grade); a component comprised of the 1 minus the property's market LTV, the equity spread (as measured by the performance of the S&P 500) and a volatility coefficient beta for stocks (measured by the covariance between real estate equity returns and market returns, divided by the variance of market returns); finally, the negative of the growth rate.
Cap rates are also typically expressed as the discount rate less the property growth rate. Following this logic, one can collapse all of the above components of the cap rate, except for the growth rate negative, into the cap rate's given discount rate. Therefore, given a cap rate, one can look up the risk free rate, the market cost of debt, the BAA bond spread, the equity spread and the equity volatility beta and find the growth rate of the property assumed. All of the aforementioned components are regularly published.