Your uncle passed away and left you $10 million with the stipulation that it be invested in real estate in the next 90 days. As word of your newfound wealth leaked into the real estate brokerage community, a line of brokers formed outside your door. “You should buy this office building” said the first broker, Ira Our. “At $20 million you’ll have to borrow money to buy it, but I know an Office Building REIT that wants to buy it for $21 million. The problem is that their Investment Committee doesn’t meet until next week and the Seller needs a binding Letter of Intent this week. You can flip the building in 45 days to the Office Building REIT and, after all expenses, pocket a quick $500,000. It works out to a 32.5% Internal Rate of Return. How are you going to beat that?” What are the practical and theoretical weaknesses in the investment/valuation methodology of Ira Our?
Mortgages
A mortgage is a formal agreement in which a bank or other financial institution lends cash at interest in return for assuming the title to the debtor's property, on the condition that the obligation is paid in full.
Mortgage
The term "mortgage" is a type of loan that a borrower takes to maintain his house or any form of assets and he agrees to return the amount in a particular period of time to the lender usually in a series of regular equally monthly, quarterly, or half-yearly payments.
Your uncle passed away and left you $10 million with the stipulation that it be invested in real estate in the next 90 days. As word of your newfound wealth leaked into the real estate brokerage community, a line of brokers formed outside your door.
“You should buy this office building” said the first broker, Ira Our. “At $20 million you’ll have to borrow money to buy it, but I know an Office Building REIT that wants to buy it for $21 million. The problem is that their Investment Committee doesn’t meet until next week and the Seller needs a binding Letter of Intent this week. You can flip the building in 45 days to the Office Building REIT and, after all expenses, pocket a quick $500,000. It works out to a 32.5%
What are the practical and theoretical weaknesses in the investment/valuation methodology of Ira Our?
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