writing a real estate finance thesis paper, any topic suggestions?

17 Replies

Hi everyone,

I am a senior in university and my final finance class requires us to write a thesis type paper (research paper with "significant original contribution" to the topic) and so I was hoping to spend this time researching and building on a topic that we all enjoy, real estate.

The requirements are really open-ended so I was wondering if anyone here might have some interesting ideas/prompts/questions to write about in the subject of real estate finance. It will take about 2 months to complete and be anywhere from 50-100 pages so I can really dig deep into the topic. I would be glad to share the final product at the end of the semester as well if anyone is interested.

I am posting this not only for my benefit, but to benefit anyone else that is interested in a topic and would like some research and data.

Thank you in advance for any help or direction!

One of the biggest issues i face when working with real estate investors is trying to convince them that they should use and leverage hard money over using all their cash on one deal. There are many areas/tops leaning one way of the other with this dilemma that you can talk about with this topic and their is plenty of room to pick it apart. 

My 2 cents.

Hard money wins in the end anyway. 

If I were to write something like this, I'd want to benefit myself and others in their investing endeavors. Why don't you write about the trends of rental markets and the future of the real estate investment?

Or study real estate history, and speak to the current state of the market. Are we in a bubble? Is a bubble looming? How much more growth is expected? You could even devise a model and speak to that as well.

I like the hard money suggestion. Although I use hard money on every single deal so I obviously agree with Paul's conclusion at the end there. :-)

Some items I'd suggest:

IDEA 1)  Are current risk factors used in lending guidelines the best ones?
Are the current risk factors currently being looked to for loan qualifications really the most important signs of default?  It has never made sense to me that banks do not use cash flow as one of the key guidelines to approving a loan.  But there are others as well. Maybe commercial lenders would then do 30 yr amort instead of 20? i.e. Longer amort periods equals Higher cash flow numbers which equals less risk.....  That would be my thesis statement to prove. 

IDEA 2) Leverage - good or bad.
Leverage is a good thing when it comes to real estate.  Some people are completely against being leveraged in real estate. But the alternative is to use cash and get lower returns.  

IDEA 3) Real estate as the best investment vehicle that exists today.
Discuss all the ways that real estate makes you money. Compare with other investments. Compare tax advantages. Show how real estate makes you money today (i.e. rental income) and tomorrow (principal paydown and appreciation). Whereas stocks only make you money today. If you sell your stock for a distribution today, your investment will never gain in value.

Perhaps creative financing in general. Where are real estate investors going to get financing when banks are being short to lend.  You could break down your paper like this:

1) Background - banking crisis, banks not being as willing to lend, how lending criteria changed

2) Overview of creative financing methods with subsequent sections going more into depth on each one

3) Hard money - what is it, how did it get started, how people find lenders, what lenders charge, and why people use it

4) Private lending - what it is, how people find private lenders, why people would go to friends and family for real estate investing

5) Peer-to-peer lending - sites like Lending Club and Prosper

6) Credit cards - using cash advances, 0% balance transfer offers

7) Crowdfunding

You could more than easily write 100 pages on the above topic.  There's TONS of information on Bigger Pockets and other sources about these areas.

Having written a thesis, albeit in another field, I can say that @Dawn Anastasi  is proposing a very ambitious thesis for @Corey Taber  .   Sounds like 1000+ pages to me.  Corey, you best be gittin' to the gittin'!  

Why so cruel, Dawn?  :)

@Kurt F.   just write single-spaced in 8 point font and it will only be 100 pages.  :)

Single family rentals is an emerging institutional asset class as evidenced by the recent IPO of SFR REITs like SBY and numerous others, not including PE firms.

Looking at historical trends (may require some assumptions), compare rates of return for single family, multifamily and commercial property relative to stock/bond portfolios. 

Is is truly a good investment that providers superior risk-adjusted returns

Thanks a lot everyone, those were some really good ideas. I have talked to a couple professors already and had an impressive list of topics to discuss with them.  The concensus so far is that I should write more toward something like Brandon suggested where I can devise a model to forecast future growth and the current state of our real estate market since they want something more academic/statistical/econometric. Since I go to school in Montreal, it will more than likely be about how to determine a real estate bubble, whether Canada is currently in a real estate bubble, and what the side effects will be, etc. I should have it sorted out by the end of this week for sure but just wanted to say thanks again- I wasn't expecting so much help. If anyone would like to see the final product just message me I would be more than happy to share.

@Corey Taber  pretty cool stuff my man. Out of curiosity what do you want to do in the future?

I assume that your paper needs to include tons of statically data, graphs, parameters, etc. Use CMHC as a reference tool as this may be a resource that you can include in your submission.

Feel free to contact me if you want an investors perspective. Also give us updated on the topic.

I taught finance and I can tell you that what I (or any teacher) will be looking for are the practical applications of the course material.  For a better grade, consider the emphasis the instructor gave to certain areas of instruction in that class. You should have a sense of what areas were felt to be more important or areas where your instructor seemed better versed in teaching. Select a topic that lends to the instructors' talents, interests, concerns and expertise. That will be harder to snow them, but they won't expect you to perform beyond the course level.

I agree with the aspect of finding the optimal point of leverage as it will allow you to utilize more principles of finance and economics than running a specific model in forecasting (unless the class was financial forecasting).

You'll be considering forecasting from pro forma assumptions, opportunity costs, alternative investments, cash flow, regulatory issues, use of cash, timing aspects, optimum liquidation analysis, maturity distributions of assets for liquidity, debt management and interest rate risk exposure. Won't list each chapter, but you'll have a lot of leeway for objective and subjective analysis and moreover, commentary for opinions.

If it's good enough, you might touch it up as a book for small investors, LOL.

Including different sources of financing is a good thought, however I doubt you can drill that deep into these sources as to their functioning requirements and how that applies to the borrower's planning in two months.  I'd suggest you include sources of financing bit not go into how they operate rather than staying on your side of the fence as a consumer or use of funds.

When you get your topic nailed down I'd be happy to give a little guidance if you need it, but no, I'm not doing it for you.... 

Good luck and study well!  :)  

Originally posted by @Zoran M. :

Single family rentals is an emerging institutional asset class as evidenced by the recent IPO of SFR REITs like SBY and numerous others, not including PE firms.

Looking at historical trends (may require some assumptions), compare rates of return for single family, multifamily and commercial property relative to stock/bond portfolios. 

Is is truly a good investment that providers superior risk-adjusted returns

 Not exactly. The emergence of REITs are really just a function of making money, investment managers want money from individual investors, and because those investors might not be institutional, REITs became more popular. They were actually created shortly after WWII, and have just recently started to be "trendy" again. About 3 years ago they were vilified and despised, ask anyone who owned Inland Western (now RPAI) how fun the transition from private REIT to exchange listed REIT was for them. 

Institutions have long used RE as a hedge and alternative asset, very similarly to gold in principle with the idea being an inflation hedge, so it isn't uncommon for investors to have 25% of their portfolio devoted to alternative assets, even if they have no experience in RE at all. 

Hello,

It sounds like you must have been able to produce an excellent final paper! I am currently doing my MBA and have a great interest in RE Finance. I would love to read your paper if possible? If yes, please email me 

Thanks in advance!

Originally posted by @Zoran M. :

Single family rentals is an emerging institutional asset class as evidenced by the recent IPO of SFR REITs like SBY and numerous others, not including PE firms.

Looking at historical trends (may require some assumptions), compare rates of return for single family, multifamily and commercial property relative to stock/bond portfolios. 

Is is truly a good investment that providers superior risk-adjusted returns

Great forum... I like Zoran's idea--really current, really interesting, and should be a chance to be original. I did an early, short, big picture Seeking Alpha piece (Private Equity Binge and Purge or something or other )on this topic, arguing it may be hard to use single family at scale for  many reasons (like, they are all spread out and not uniform, etc)... 

But the upturn in the market may prove some pencil out when sold (cash flow, not so much, or so I'd guess).

That said, the management, agency costs, and fact they probably need to re-remodel these for sale (since they were rentals) may eat into profits. With the public firms you should be able to get some numbers. Those as part of private equity, I am less sure.

What I am essentially saying is that Wall Street got interested in main street and bought up on a massive scale single family homes (often in foreclosure) and through partners or subsidiaries managed them (or sold them off). While Wall Street has like multifamily a long time, this single family idea was new and you could do a great piece on how it is (or isn't working out)..... Heck, you have a page or two just in the abstract above!

This post has been removed.

Hey @CoreyTaber I would love to know how your research came out, please share  email 

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