Journal of Finance and Investment Analysis

Real estate and matricial analysis

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  • Abstract

    In this paper a new approach is presented to establish unit sale values for residential properties constituted as horizontal property units, common said freehold apartments or flats, considering a real estate investment and its Estimated Market Value (EMV). The economic and financial parameters associated to a certain real estate investment being known, such as design and construction costs, expected sale’s values and marketing fees, an associated profitability can/may be determined. For a presumed profitability on a given real estate investment of freehold flats, the matrix analysis allows to ascertain the overall EVM (i.e., the amount of income) according to the units typologies, constituting the whole investment, or assigning a marketing target per square meter unit value. A study case is presented in the article considering the referred matrix approach analyzing a real estate investment consisting of different flat types (in horizontal property) to ascertain unit sale values and, at the same time, granting the overall EMV and consequently its profitability. Considering the study case and the methodology followed by the inversion and matrix multiplication of precisely defined independent terms, one can state that the application of a matrix approach in the analysis of real estate investment is a fast and easy tool to monitor the variability of different parameters related to market investment allowing to fix unit values (per square meter) of flats based on a target profitability value for the investment.

    JEL classification numbers: C02, C65, D81, R20
    Keywords: Real Estate Appraisal, Estimated Market Value (EMV), Matrix Analysis of Real Estate Values.