The Distribution of Real Estate Data
A special and useful property of the normal distribution is that you can create a pdf for it by knowing only the mean (expectation) and variance, known as the first two "moments" of the distribution. In Chapter 3 of Private Real Estate Investments we initially assumed (naively at that point) that the expense ratio observations were distributed normally. Using apartment sales, we created and plotted the pdf for such a distribution from its first two moments, noting how many of the observations fell below a certain percentage. Below we show a similar pdf with all observations at or below 25% expenses highlighted in red at the left end of the distribution.
