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Real Options In Investing In Real Estate

Author

Listed:
  • Milcho Bliznakov

Abstract

The paper compares different approaches to assessing real options (abandon options) when investing in residential property. The value of the investment is determined by capitalizing on rents at a constant rate of growth model Gordon.The risk-neutral probability approache, and the Datar-Mathews method are applied to real estate market data and compared. The results obtained when evaluating the abandon option are comparable. Availability of real options increases the value of the investment.

Suggested Citation

  • Milcho Bliznakov, 2019. "Real Options In Investing In Real Estate," INTERNATIONAL SCIENTIFIC AND PRACTICAL CONFERENCE "CONSTRUCTION ENTREPRENEURSHIP AND REAL PROPERTY", University of Economics - Varna, issue 1, pages 164-170.
    • Handle: RePEc:vrn:emccon:y:2019:i:1:p:164-170
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    File URL: http://conference.ue-varna.bg/emc/wp-content/uploads/2019/11/sbornik-dokladi_2019.pdf
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    More about this item

    Keywords

    Investments; Monte-Carlo simulation; Portfolio reproduction; Real Options; Risk neutral probabilities;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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