Features of the Use of Capitalization Ratios to Assess the Economic Efficiency of Investments in Real Estate

Abstract

The article discusses some ways to assess the economic efficiency of investments in real estate. The initial premise of the study was the property of real estate, which consists in the variety of motives for its acquisition, which can lead to a change in the value of the same property, depending on the nature of its use. Currently, real estate is becoming a popular investment tool for many investors, including those who do not have deep economic knowledge. For this reason, such methods of assessing the economic efficiency of investments that require a minimum of initial data and require simplicity and accessibility of calculations become especially relevant. As such methods for real estate, it is advisable to use the calculation of capitalization ratios, as well as auxiliary ratios: operating expenses ratio and debt coverage ratio. The article analyzes the features of the calculation of income and expenses associated with the operation of real estate. The specificity of the use of various sources of information depending on the goals of investment analysis is revealed. The features of the calculation of capitalization coefficients, auxiliary coefficients are considered, as well as various options for interpreting the results of calculating these coefficients, depending on the tasks being solved. The advantages and disadvantages of using the mentioned indicators, their areas of application are revealed.