Chapter 25

Land-Use Control
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Zoning Laws
•	Regulates the purpose for which buildings may be constructed along with its height and bulk. 
•	Establish lot area requirements.
•	Number of parking spaces.
•	Number of persons that can be accommodated. (density limitations)

Common Zoning Symbols
•	R – residential
•	C – commercial
•	I  – industrial
•	A – agriculture
•	M - manufacturing
Lincoln Zoning
•	Agricultural
•	Residential
•	Office
•	Business
•	Highway
•	Industrial
•	Public Use
•	AG Agriculture District

•	AGR Agricultural Residential District
	(provide for a vigorous agricultural industry combined with lowdensity, acreage residential development in selected portions of the county)
 
Lincoln Zoning
•	Agricultural
•	Residential
•	Office
•	Business
•	Highway
•	Industrial
•	Public Use
•	R-1 through R-8 plus 
R-C and R-T
•	Examples: 
R1 a gross density of generally three to five dwelling units per acre
	R5 between six and ten dwelling units per acre
	R8 high density residential uses
	C-Conservation &T-Transition
Lincoln Zoning
•	Agricultural
•	Residential
•	Office
•	Business
•	Highway
•	Industrial
•	Public Use
•	O-1 through O-3

•	B-1 through B-5

•	H-1 through H-4

•	I-1 through I-3
Land Use - Some Key Terms
•	Nonconforming Use

•	Variance

•	Conditional Use Permit
•	“Grandfathered In” existing structure not conforming to new zoning
•	Deviate from zoning requirements, changes permitted use
•	Allow certain uses within particular limits
Land-Use Restrictions
•	Enforcement
	Building permits
•	Amendment
	Changing the law
•	Spot zoning
	Rezoning of a small area
•	Downzoning
	Zoning change to lower density
•	Taking 
	Zoning results in economic loss
•	Buffer zone
	Strip of use separating uses
•	Legality
	Unclear, discriminatory, unreasonable, equal protection
•	Value
	Doesn’t create value, creates uses
Building Codes
•	Minimum acceptable materials and construction standards needed to protect public health and safety.
•	Includes standards for structural load and stress, windows & ventilation, size & location of rooms, fire protection, exits, plumbing, heating, lighting, and more!
Deed Restrictions
•	Restrictions on land use that a owner places in the deed to control future development.
•	Also known as restrictive covenants.
•	Conflicting with Zoning - (most restrictive)
Comprehensive Plan Considerations
•	Land Use
•	Housing needs
•	Movement of people and goods
•	Community facilities and utilities
•	Energy conservation

Comprehensive Plan
•	Balance environmental and aesthetic concerns against economic uses
•	Provide goals and objectives for future growth
•	View region as a unified entity rather than a group of competing areas
•	Provide growth guidelines and guidance to developers and planners
•	Often results in windfalls and wipeouts
Environmental Impact Study
•	Used to determine the effect of a proposed project on the total environment.
•	Includes:
–	Probable impact on area.
–	Adverse environmental effects.
–	Alternatives to proposed project.
–	Listing of irreversible commitment of resources if project is implemented.
Key terms
•	Building codes
•	Certificate of occupancy
•	Downzoning
•	EIS
•	Land-use control
•	Master plan
•	Nonconforming use
•	Restrictive covenants
•	Variance
•	Zoning law

Real Estate Principles
Tenth Edition

Real Estate:
An Introduction to the Profession
Tenth Edition

Chapter 26

Real Estate and the Economy
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•	Ability of area to produce a commodity or service that will bring in money from outside.
•	Industries that produce goods & services.
•	Base
•	Export
•	Primary
•	Consumable goods and services are service or secondary (schools & lawyers)

   Short-Run Supply-Demand 
•	Home Sales
•	Job Growth
•	Low interest rates
•	Rising home prices

•	Housing inventory
•	Supply >6 ½ month of sales, prices flatten
•	Supply<6 ½ month of sales, prices rise 
   Short-Run Supply-Demand 
Economic Factors
•	Effect on Property Value
•	Vulnerability: diversified industries
•	Employment Multiplier: for each base job created approximately two secondary jobs created
•	Housing demand – short & long run
•	increases & decreases in supply & demand
•	effect on inflation
  Lifetime Income Curve
Age Distribution of U.S. Population
  Governmental Impact
•	Tax laws
•	Fiscal policy
•	Monetary policy
•	Mortgage markets
    Inflation
•	Cost-Push
 Increases in costs pushes up price of end product
•	Demand-Pull
	Increases in demand (multiple buyers) forces up price
•	Monetary
	Increases in spending money due to inflation, allowed people to buy more and to spend more on what they bought
    Inflation (continued)
•	Real-Cost
	Actual increases in costs not due to money supply
•	Tax Benefits
	Itemized deductions for home mortgage interest become more valuable as income increases, and appreciation of homes not fully taxed (capital gain treatment)
•	Watch the Feds
	Monetary supply and setting of interest rates impacts investment in real estate

  Key Terms
•	Base industry
•	Cost-push inflation
•	Demand-pull inflation
•	Economic base
•	Federal Reserve Board 
•	Monetize the debt
•	Real
•	Real-cost inflation
•	Service Industry

Chapter 27

Investing in Real Estate
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Sources of Return from a
Real Estate Investment
•	Appreciation – increase in property value over time.
•	Mortgage reduction – the decline of the mortgage balance as payments are made.
•	Cash flow – money left each year after paying property operating expenses and debt service.
•	Tax shelter – tax savings and tax deductible expenses generated by an investment property.
•	Loan refinance proceeds
How to Find a Good Deal:
CLEAR
•	Cash Flow: Is cash flow necessary, what about the market, interest rate, expenses & maintenance, upkeep and repairs?
•	Leverage: Using borrowed money increases return.
•	Equity: Buying equity either by discounted price, fixer upper, rezoning, new management, distress sale adds value.
•	Appreciation: Plan on long term investment.
•	Risk: Manage risk, make sure you have back up plans in your investing strategy.
Cash Flow Projection

Taxable Loss
Calculating Equity Build-up
Leverage
•	The ability to use borrowed funds to purchase investment property. 

GLITAMAD

Lifetime Income and Consumption Patterns
Comparative Appraisal and Investment Objectives
Comparative Appraisal and Investment Objectives
Comparative Appraisal and Investment Objectives
Comparative Appraisal and Investment Objectives
Bubble or Boom
•	What is a bubble?

•	Rapidly increasing prices
•	Strong sales
•	Housing sales as percent of GDP (2005 about double of average)

Bubble or Boom
•	What is a bubble?

•	What fuels a bubble?

•	Short supply of housing
•	Low interest rates
•	Refinancing & reinvesting
•	Higher income to home cost ratios
•	Low competition for consumer dollars
•	Speculation and investment
Bubble or Boom
Bubble or Boom
Buying In Bubble Market
•	Don’t over extend
•	Limit your housing costs to 25% and 32% 
•	Don't assume continued to appreciation
•	Don't buy because you're afraid you'll miss out 
•	Don't buy just because you think it's a good investment. 
•	Don't indulge in cash-back refinancing 
•	Don't purchase with an interest-only loan
•	Choose a modest home in a good neighborhood 
•	Avoid buying a house that has appreciated above the average rate
Key Terms
•	Cash Flow
•	Cash-on-cash
•	Downside risk
•	Equity build-up
•	Investment strategy
•	Leverage
•	Negative cash flow
•	Prospectus
•	Straight-line depreciation
•	Tax shelter

Environmental Issues
Jan E. Beran
UNL-Lincoln, Finance 382
Real Estate Principles and Practices
http://www.beranlaw.com/students/fin382
Balance 
Public Interest vs. Private Rights
•	Health and safety concerns
•	Information about property
•	Hazardous substances
•	Liability for health problems
•	Environmental issues

•	Affect value of property
•	Privacy rights
•	Obligation to disclose “latent” defects
•	Clean up or abatement
•	Disclosures and expertise
Dangers from All Around
Hazards
•	Asbestos
•	Lead Based Paint
•	Radon
•	Urea-Formaldehyde
•	Groundwater Contamination
•	Underground Storage Tanks
•	Waste disposal sites
Other Environmental Issues
•	Carbon Monoxide
•	Electromagnetic fields
•	Indoor air problems
•	Outdoor air problems
•	Endangered species
Remediation
•	Encapsulate
•	Removal
•	Other remediation techniques
•	Disposal
Legal Considerations
•	Statutory law
•	Federal laws
•	CERCLA/Superfund
•	Lead Paint
•	Asbestos
•	State environmental laws
•	Local
•	Common Law
•	Based on tort, contract or other theory of recovery:
•	Fraudulent/negligent misrepresentation
•	Fraudulent/negligent concealment
•	Primarily covers known latent defects
Implications
•	Potential liability for the agent and owner
•	Appraisers need to be aware of effect of environmental issue on value of subject property and neighboring property
•	Insurers
•	Mortgage companies

Disclosure Requirements
•	Sellers of residential property must disclose
•	Asbestos
•	Contaminated soil or water
•	Landfill or buried materials
•	Lead based paint 
•	Radon
•	Toxic Materials
•	Underground tanks
•	Hazardous substances
•	Penalty for failure to comply

Agent’s Responsibility
•	Agent has no obligation to inspect for defect
•	Advise Seller to disclose
•	If Agent knows of “defect” has obligation to disclose to customer
•	May be liable for damages if:
•	Fraudulent/negligent misrepresentation
•	Fraudulent/negligent concealment
Questions?
•	Patent or Latent Defect
•	Disclosure
•	Primary environmental concerns
•	Potential liability concerns