Real Estate Financing: Arbitrage Conditions and Cost of Capital

This lecture discusses the concept of arbitrage conditions in real estate financing, where the equality between real estate and financial wealth is explored. It covers scenarios of accommodating financing, extreme financing cases, and the impact of varying debt amounts on property prices. The lecture delves into the calculation of the cost of capital, the implications of different financing structures, and the discounted cash flow analysis from the owner's perspective. It also addresses the role of debt financing partners, the treatment of debt-related payments, and the adjustments needed for fixed capital amounts. The lecture concludes by highlighting the importance of the weighted average cost of capital in justifying discounted cash flow valuations.