Pickney Street Harvard Case Solution & Analysis

Pickney Street Case Solution

  1. How would you evaluate the Pinckney Street property? What are the risks and rewards?


Pinckney Street Property was found in Beacon Hill near Boston. It was established in 1804 as a middle income townhouse. However, the property prices are declining in Bostonnonetheless,Pinckney Street also sustained its price value because of distinguishable characteristics such as the availability of natural light on a corner two sided, large bedroom apartments etc., which is why many investors want to invest in this property.


Pinckney Street Property was damaged by fire and it had to be renovated. According to architect’s estimation, it might need $450000 for renovation and after that the property cost would be $1.45 million.Rent in this area was high, which increased the expectations of the investors towards the return. Mostly upper class families such as doctors, engineers, lawyers and other professional peoples want to live there as the location has many natural views such as Charles River, Boston public garden, Boston best shopping malls, state house and Boston’s financial district. However, Lee has little knowledge of real estate, therefore it was difficult for him to make a decision without the support of real estate agents.Furthermore,Cash flows were calculated by Lee based on the projection however,there was a chance that the cash flows might not be according to their projections.

  1. Identify and discuss some of the alternative financial options and strategies Lee can employ in purchasing this property.


Lee can use different sources for financing such as mortgage financing, loans from relatives or friends, and loans from private and public banks. If mortgage financing is being used, Lee has to pledge his property. In mortgage financing, repayments consist of both interest and capital, which are usually in the time period of25 to 30 years, which indicates that the payments in mortgage have reduced the burden of capital each year.Lee can also obtainloan from his relatives or friends at zero or low interest rate, whereas, public and private banks charge high rate of interest.

Another option for Leeis to obtain loan from his job or to find a partner who would invest with him. In partnership, finance can easily be raised and partners share the responsibility by increasing the credibility. This indicatesthat the more partners there are, the more money they can put into the business, which would, as a result,allow better flexibility and more possible for growth. It also indicates that there aremore potential profit, which will be evenly shared between the partners.

  1. Describe Lee's qualitative analysis and search methodology.  How did he attempt to find an investment property? Who aided him in his search?  What were the strengths and weaknesses of his search method?


Lee started researching regarding investing in real estate in the year 2013. Although he has no experience of investment in real estate however,he started gathering knowledge through census tract, Boston standard metropolitan statistical area (SMSA). Through this, he gathered the demographic data of Beacon Hill residents with respect to their age, gender, marital status, income, and ethnicity. He checked the nearest locations of Beacon Hill, which mostly attracted the high class people. He also visited many websites such as trulia.com and realtor.com to identify the listed value of properties in Beacon Hill and Back Bay. Furthermore,he also compared the mortgage rates offered by different banks and companies. In order to increase his knowledge regarding real estate investment, he accessed multiple listing services (MLS) on boston.com. Moreover, one of his friends told him about Zillow.com, where he found interactive mapping, comparison between different properties and selection features.....................

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