Efficient project selection for real estate investment analy

Direct investment in real estate involves different risk characteristics than investment in typical financial securities, yet real estate investments compete for money within the same risk-return framework. Characteristics such as local markets, slow price discovery, indivisibility, and long holding...

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Bibliographic Details
Published in:Real Estate Finance 1995-04, Vol.12 (1), p.63
Main Authors: Finch, J Howard, Fulmer, John G
Format: Article
Language:English
Subjects:
Capital assets
Cash flow
Internal rate of return
Investments
Limited partnerships
Liquidity
Net present value
Portfolio management
Profitability
Project finance
Proposals
Real estate
Real estate financing
REITs
Securities analysis
Sensitivity analysis
Statistical analysis
Studies
Volatility
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Summary:Direct investment in real estate involves different risk characteristics than investment in typical financial securities, yet real estate investments compete for money within the same risk-return framework. Characteristics such as local markets, slow price discovery, indivisibility, and long holding periods make project liquidity an important consideration for many real estate analysts. Relying solely on liquidity measures, such as duration, or profitability measures, such as NPV, may not result in wealth-maximizing decisions. By considering both duration and NPV in the project selection process, the analysts may identify the set of projects that provide the efficient combinations of profitability and liquidity.
ISSN:0748-318X