Using rents and price dynamics in real estate portfolio valuation-Reference-Cited by-同舟云学术

Using rents and price dynamics in real estate portfolio valuation

Published:2007-10-23 Issue:5 Volume:25 Page:462-486
ISSN:0263-7472
Container-title:Property Management
language:en
Short-container-title:

Author:

Baroni Michel,Barthélémy Fabrice,Mokrane Mahdi

Abstract

PurposeThe aim of this paper is to use rent and price dynamics in the future cash flows in order to improve real estate portfolio valuation.Design/methodology/approachMonte Carlo simulation methods are employed for the measurement of complex cash generating assets such as real estate assets return distribution. Important simulation inputs, such as the physical real estate price volatility estimator, are provided by results on real estate indices for Paris, derived in an article by Baroni et al..FindingsBased on a residential real estate portfolio example, simulated cash flows: provide more robust valuations than traditional DCF valuations; permit the user to estimate the portfolio's price distribution for any time horizon; and permit easy values‐at‐risk (VaR) computations.Originality/valueThe terminal value estimation is a core issue in real estate valuation. To estimate it, the proposed method is not based on an anticipated growth rate of cash flows but on the estimation of the trend and the volatility of real estate prices.

Publisher

Emerald

Subject

Business, Management and Accounting (miscellaneous),Finance

Reference24 articles.

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2. Baroni, M., Barthélémy, F. and Mokrane, M. (2001), “Monte‐Carlo simulations, and the use of option pricing models in real estate”, paper presented at the ERES 2001 Conference, Malaga, September 4‐6.

3. Baroni, M., Barthélémy, F. and Mokrane, M. (2005), “Physical real estate: a paris repeat sales residential index”, Journal of Real Estate Literature, Vol. 13, pp. 303‐24.

4. Byrne, P. (1995), “Fuzzy analysis, a vague way of dealing with uncertainty in real estate analysis?”, Journal of Property Valuation and Investment, Vol. 13 No. 3, pp. 22‐41.

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