Further developing NPV analysis to evaluate real estate investment opportunities

Abstract

The primary objective of this thesis is to link the theoretical concepts of the broad academic community to the practice of the real estate industry. The most fundamental focus of this work is to build upon widely used net present value methodology in an effort to analyze real estate acquisition and development investments in a more rigorous manner. The main premise on which this paper is based is using risk-adjusted opportunity costs of capital to discount cash flows of varying levels of risk. The cases presented in this paper are included to illustrate the usefulness of the methodologies to evaluate real estate investments; thus, more attention should be given to the methodology than the results of the analysis. The methodologies presented in this paper seem to hold up quite well when apply to realworld cases. To understand the true usefulness of these methodologies it would be helpful to apply these methodologies to a wide sample of real-world deals.