I. Overview of real estate investment decisions
Real estate investment decision-making refers to the process that real estate developers demonstrate the necessity and feasibility of the proposed real estate investment projects, compare and choose different real estate investment schemes, and make judgments and decisions. [1] Due to the physical and economic characteristics of real estate itself, real estate investment also shows inherent characteristics different from other project investments. First of all, the real estate industry is a capital-intensive industry with huge project investment and high capital dependence. In addition, the structural problems of the real estate market are more prominent. Generally, investors are reluctant to invest their money in special factories, docks and other irreplaceable properties, while shopping malls, office buildings and apartments are often rented by various companies, which are convenient to replace and use and can attract investors' attention. Secondly, because real estate can be used as collateral, loans can generally be recovered safely on schedule, so it is easy to get the support of financial institutions. Due to the importance of the real estate industry in social and economic life, governments all over the world are very concerned about the investment in the real estate market, and often regard the real estate market and real estate regulation as an important aspect of regulating the economy, and the amount of real estate investment is therefore affected by government policies; Finally, due to the immovability and long payback period of real estate, real estate investment has long been adversely affected by changes in future macro-economy, society, politics, laws and regulations and natural and environmental factors, with many risk factors and relatively high risk level. Therefore, correct and reasonable real estate investment decisions are of great significance to investment developers.
The success of real estate development investment decision depends not only on the quality, knowledge and ability of decision makers, but also on understanding and mastering the theoretical knowledge, basic content and types of decision-making, and using the theoretical methods of scientific decision-making. The decision-making of real estate investment can be carried out in the following four steps: first, put forward the goal of real estate investment decision-what problems are required to be solved; Second, make an action plan for real estate investment-there are several possible plans; Third, make economic, social and environmental evaluation on real estate investment projects, compare investment schemes, and finally determine the best real estate investment scheme; Fourth, take reasonable steps to implement and test the best real estate investment scheme according to scientific methods. (1) Investment strategy is the premise of correct investment decision-making, and project decision-making according to investment strategy is the basic requirement of scientific decision-making.
There are many and complicated factors that affect real estate investment decision-making, so it is necessary to systematically analyze the important factors, which is of far-reaching significance for investors to make scientific and reasonable decisions and obtain huge benefits. The five most important factors affecting the real estate investment decision are summarized and analyzed in detail.
Second, the real estate investment decision-making elements analysis
(A) the timing of decision analysis
Investment opportunities always exist in the external environment of investors, which are closely related to investors' specificity, investment objectives and investment forms, and also closely related to specific investment types. The basic modes of real estate investment timing analysis generally have the following four types:
Analysis mode of environmental factors: real estate investment opportunities are a combination of some macro-factors and micro-factors in the real estate environment in a certain period, and the changes of economic, social and policy factors constitute the substantive connotation of investment opportunities. When analyzing the investment opportunities of commercial real estate in detail, we can list the possible changes of various factors that may include income for a specific commercial real estate, or we can divide various factors into macro and micro factors, direct and indirect factors for comprehensive analysis.
Life cycle analysis mode: the timing of real estate investment is closely related to the life cycle of real estate. In different stages of real estate life cycle, different properties and different subjects have different income opportunities. In the whole process of commercial real estate development, investment and operation, it will go through the stages of commercial land selection, commercial real estate construction, commercial real estate rental and sale, commercial real estate management and commercial real estate degradation. Commercial real estate investors can choose investment opportunities at different stages according to their investment objectives and strength.
Development value analysis mode: the diversity of real estate types and the differences of investors' strength and development ability determine that finding suitable development types and projects for specific subjects is the key to real estate investment profitability. The value of commercial real estate includes a considerable part of unmeasurable service value and intangible income, and the correct judgment of these values will bring profit opportunities to specific investors.
Analysis mode of industrial development: the law of industrial development and change is the basic point of grasping the investment opportunities of commercial real estate as a whole. Seize the favorable opportunity of the transformation and development of different industries to carry out related property development, which will have great returns. The demand of different types of commercial real estate often depends on the rise and fall of different commercial sectors. The evolution of urban industry may bring prosperity to different commercial and economic activities in different periods. Grasping the regularity of industrial evolution is helpful to choose the right investment opportunity.
(B) Location decision analysis
The choice of real estate lots plays a vital role in the success or failure of real estate investment. The growth of real estate largely depends on the appreciation of location land. Location theory is the theoretical basis of investment location selection, and the following methods can be used in specific decision analysis:
Factor analysis. Analyze various natural factors, economic factors, social factors and administrative factors that affect the location value of real estate, and grasp the formation, development and change law of advantageous lots in the comparison of factors in different lots. Identify various macro and micro factors that can enhance the value of commercial real estate in a specific area, and grasp the formation and transformation of advantageous lots by predicting the changes of these factors.
Hypothetical development method. Based on the principle of hypothetical development method, the land that can bring the greatest investment value to the enterprise is selected from different property evaluation values by estimating the income and cost of different uses of the land to be selected. Correctly predict the best utilization direction of specific lots, and grasp those lots that can bring the greatest benefits to investors on the basis of comprehensive analysis of the internal and external environment of investment enterprises.
Competitive land rent curve method. Based on the competitive land rent curve of commercial land, the most favorable investment location of commercial real estate is determined under the condition of correctly judging its own strength. The correct discrimination of commercial land income depends on investors' correct grasp of the law of urban economic activities and the evolution of urban land value.
Wilson shopping pattern method. In cities with highly developed commercial and economic activities, Wilson shopping model can be used to choose commercial advantage lots. In the process of competing for consumers between specific commercial real estate and competitive real estate, the scale of consumer groups largely determines the ideal scale of commercial real estate, thus setting the standard for the location selection of specific commercial real estate [2].
(c) Decision analysis of development content
Before choosing real estate as the investment object, the correct grasp of investment direction needs to determine the most suitable investment type. Real estate is divided into commercial real estate, industrial real estate and residential real estate according to property types. The investment cost, investment risk and profit acquisition of real estate investment for different purposes are different. When choosing between different types of real estate, we should grasp the following points: choosing a commercial or industrial land can be carried out by means of land competitive price model. That is to say, in different locations of the city, when a specific plot is used for commercial real estate development or industrial real estate development, the net income is different. Commercial net income is greater than industrial net income, indicating that it is an ideal place for commercial real estate development. Only when the commercial use value exceeds the industrial use value of the same lot can this place be reasonably selected for commercial real estate development. Of course, if you choose commercial shops, office buildings or hotels and other property types, the same method is also applicable. If a specific plot has been selected, it is assumed that the principle of development law can also be used to choose its different uses. The basic formula of this method is:
Industrial parcel land price = expected industrial real estate price-expected development cost-normal development profit
Commercial parcel land price = expected commercial real estate price-expected development cost-normal development profit
If the commercial parcel land price is greater than the industrial parcel land price, it can be considered that it is reasonable to choose this plot.
(D) Scale decision analysis
The optimal scale of commercial real estate should comprehensively consider many factors such as enterprises, regions, product characteristics and so on. When investing in commercial real estate, enterprises should not only consider property factors, but also consider comprehensive factors such as enterprise capital status, market position and operating ability, and strive to find a reasonable allocation of enterprise resources. For enterprises with leading product production, the optimal scale of their asset investment should be considered in combination with product value and asset value. For fully market-oriented commercial real estate, whether it is an office building or a commercial shop, its development investment scale should also consider the market stock of this type of property. In the specific implementation, we can consider using the formula: remaining area = saleable area-transaction area to roughly estimate the current market supply and demand situation, and make a detailed analysis of the strength of major competitors (or potential competitors). On this basis, we can finally determine the optimal scale of commercial real estate.
In view of the special situation of China real estate market, it is increasingly difficult for real estate investors to determine the investment scale. The imbalance between supply and demand in the real estate market is very common. Therefore, real estate investors should strictly control the development scale according to market information and conditions to ensure the balance between supply and demand in the market. On the one hand, when making decisions on the scale of real estate investment, developers should adopt break-even analysis from the perspective of real estate development cost to ensure that investment projects can produce the best economic benefits even if they reach the lowest production level and sales level when they break even; On the other hand, real estate investors should be market-oriented and correctly predict market demand. When necessary, the mathematical model of real estate development scale optimization is established by using economic control methodology, which provides theoretical reference for real estate developers and government management departments to make decisions. [3]
(5) Quality control decisions
The investment quality of commercial real estate includes its own quality and management service quality. From the investor's point of view, the basic connotation of real estate investment quality is the provisions of commercial real estate lease on the rights and obligations of both parties, which mainly include: lease term, rent modification term, lease modification conditions and lessee's responsibility statement; It also includes the physical attributes of the property itself that affect investors' income, such as location, building age, fashion degree, building quality, building scale and rationality of internal layout. However, tenants' understanding of property quality is completely different from that of investors.
Table 1 Comparison of Quality Views between Real Estate Investors and Users
Therefore, for real estate investors, the determination of real estate quality objectives should comprehensively consider the quantity, price, construction cost and profit required by users, so as to achieve the two-level quality level that users are willing to buy and investors are satisfied with the return.
Third, real estate investment decision-making recommendations
(A) do a good job in the market positioning of real estate development enterprises
The investment strategy of real estate development enterprises must be based on the overall business strategy of enterprises to study the market positioning of enterprises. The market orientation of real estate development enterprises is to understand and analyze consumers' demand psychology as the core and starting point, and set their own unique characteristics that are significantly different from competitors, thus causing consumers' recognition. The accurate market positioning of real estate development enterprises must do a good job in analyzing, exploring and cultivating the core competitiveness of enterprises and positioning the target market. By analyzing the advantages of enterprises in value creation, and based on this, the core competence of enterprises is determined, thus forming an effective system and system, so that the core competence can be sustained and developed. In a word, through the analysis of the enterprise, discovering and cultivating the core competence of the enterprise and opening up a target market constitute the role orientation of the enterprise. The role orientation of real estate development enterprises should ultimately clearly and accurately show the product range, market consumer groups, geographical scope and other factors of enterprises.
(2) Do a good job in the feasibility study of real estate projects.
The feasibility study of real estate project refers to the investigation and study of social, economic and technical aspects related to the proposed project before the project is completed, the technical and economic analysis and comparative demonstration of possible schemes, and the prediction and evaluation of the economic benefits after the project is completed. On this basis, the technical advancement and practicability, economic rationality and effectiveness, necessity and feasibility of the proposed project are comprehensively analyzed, systematically demonstrated, compared and comprehensively evaluated, and conclusive suggestions on how to invest are obtained, which provides scientific basis for project investment decision. Adequate market analysis and research is the premise of feasibility study of real estate projects. [4]
(C) do a good job in real estate project investment risk management
The real estate industry is a typical high-risk industry. In order to reduce the risk loss of real estate investment, it is imperative to strengthen and improve the risk management of real estate investment. Wise investors will not adopt a conservative approach of risk-free management because of risks, but learn to manage risks to obtain sufficient risk returns. Risk management has been paid more and more attention by real estate developers, and the following strategies can be adopted: risk avoidance, that is, choosing investment projects with relatively small risks or giving up projects with relatively large risks. This is a conservative way to deal with the risk of real estate investment, which can control the risk at a low level. But this strategy usually reduces the chances of getting high profits; Portfolio, real estate portfolio strategy is a real estate investment strategy that investors choose suitable projects according to the risk degree and annual rate of return of real estate investment, and invest in all kinds of real estate according to certain principles to reduce investment risks.
References:
Li Jianghong. Real estate investment strategy and its decision. Market Forum [J], 2008
[2] Hong Kairong. Real estate economics [M], Wuhan University Press, 2006
[3] Zeng. Research on investment decision-making model of real estate enterprises under uncertain conditions [D]. Hunan University, 2006
[4] Wang Jianwei. Research on investment decision-making of sustainable management of real estate enterprises [D]. Tongji University, 2005