TY - JOUR

T1 - Assessing Real Estate Investment Alternatives

T2 - A multi-criteria and multi-stakeholder decision aid tool

AU - Mantogiannis, Vasileios

AU - Katsigiannis, Fotios A.

PY - 2020/4/1

Y1 - 2020/4/1

N2 - Investment decisions in private real-estate demand the consideration of several qualitative and quantitative criteria, as well as the different or even conflicting interests of the participating stakeholders. Meanwhile, certain indicators are subject to severe uncertainty, which will eventually alter the expected outcome of the investment decision. Even though multi-criteria decision making (MCDM) techniques have been extensively used in real-estate investment appraisals, there is limited evidence from the private rented sector, which constitutes a large part of the existing real estate assets. The existing approaches are not designed to capture the inherent variability of the decision environment, and they do not always achieve a consensus among the participating actors. In this work, through a rigorous literature review, we were able to identify a comprehensive list of assessment criteria, which were further validated through an iterative Delphi-based consensus-making process. The selected criteria were then used to construct an Analytical Hierarchy Process (AHP) model evaluating four real world, real estate investment alternatives from the UK private rented market. The volatility of the financial performance indicators was grasped through several Monte Carlo simulation runs. We tested the described solution approach with preference data obtained by seven senior real estate decision-makers. Our computational results suggest that financial performance is the main group of selection criteria. However, the sensitivity of the outcome indicates that location and property characteristics may greatly affect real estate investment decisions.

AB - Investment decisions in private real-estate demand the consideration of several qualitative and quantitative criteria, as well as the different or even conflicting interests of the participating stakeholders. Meanwhile, certain indicators are subject to severe uncertainty, which will eventually alter the expected outcome of the investment decision. Even though multi-criteria decision making (MCDM) techniques have been extensively used in real-estate investment appraisals, there is limited evidence from the private rented sector, which constitutes a large part of the existing real estate assets. The existing approaches are not designed to capture the inherent variability of the decision environment, and they do not always achieve a consensus among the participating actors. In this work, through a rigorous literature review, we were able to identify a comprehensive list of assessment criteria, which were further validated through an iterative Delphi-based consensus-making process. The selected criteria were then used to construct an Analytical Hierarchy Process (AHP) model evaluating four real world, real estate investment alternatives from the UK private rented market. The volatility of the financial performance indicators was grasped through several Monte Carlo simulation runs. We tested the described solution approach with preference data obtained by seven senior real estate decision-makers. Our computational results suggest that financial performance is the main group of selection criteria. However, the sensitivity of the outcome indicates that location and property characteristics may greatly affect real estate investment decisions.

KW - multiple criteria

KW - decision support

KW - MCDM

KW - AHP

KW - Delphi

KW - real-estate

KW - investment appraisal

U2 - 10.13033/ijahp.v12i1.702

DO - 10.13033/ijahp.v12i1.702

M3 - Journal article

VL - 12

SP - 136

EP - 165

JO - International Journal of the Analytic Hierarchy Process

JF - International Journal of the Analytic Hierarchy Process

SN - 1936-6744

IS - Issue 1 2020

ER -