Current problems of valuation and real estate management by value
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Real estate management consists of making decisions and performing actions to maintain a real estate property in an unimpaired condition according to its designation and at reasonable investment in this real property. These activities cover diverse aspects of real estate acquisition and use and are oriented, among others, towards increasing the capital of real estate owners. Value-based management is both a management philosophy and a practice requiring full coordination of all actions carried out in this complex process. It should be noted that a special role is played in the process by real estate appraisal, whose methodology has a centuries-old history. It is rooted in discussions devoted to the category of value and the principles of its measurement. It turns out that historically-formed appraisal methodologies do not stand the test of time. They undergo continuous evolution, with the trends of changes of both an exogenous and endogenous character. Moreover, there are many unsolved problems related to real estate value determination, which can be an inspiration for both theoreticians and practitioners to seek new solutions, taking into account both proper market imitation and the requirements of real estate owners and users. The appropriate real estate property appraisal method is selected by a real estate appraiser, taking into account, among others, the purpose of the appraisal, the type, function and location of the real estate property, its condition and the available market information. The profit method is used in many cases for real estate appraisal, especially for untypical real estate properties, which are rarely the object of transactions in the market. To illustrate the problems which occur during the application of this method, the study presents two examples of appraisals, which concern a gas station and a real estate property developed with a building in which a hotel and a restaurant operate. The process of value-based real estate management should take into account the specificity of the real estate property related to its function, its utility or intangible values. The thesis can be proposed that efficient real estate property management, especially for a historic real estate property, requires the knowledge of the market value expressed as a value range. This requires the indication of such a method for historic real estate value determination which takes into account both the strengths and weaknesses resulting from the possession and use of this specific national treasure because it is economically necessary today to treat a historic building also as an object of investment and a business venture. This approach will help to save cultural and historical values and may allow a satisfactory rate of return on the capital invested to be obtained by the investor. The theoretical analyses presented in this study were verified based on a palace and castle complex currently in use and under development. The residual method was first applied to determine the value and a sensitivity analysis of the development project was then performed. At the same time, the advantages and threats were indicated which could result from the application of the residual method and sensitivity analysis, both for the determined real estate property value and for financially efficient real estate property management based on the determined value. Appraisal of the market value of commercial real-estates is most commonly performed based on the relation between the income obtained from the real estate and its market value. Building a model which includes the largest possible amount of factors affecting the real estate value is a difficult and very complex task. The final verification of the statistical model does not take place at the time of its development or testing but as a result of the comparison of the prognoses’ results with actual transactions made after the implementation of the model. The most difficult moment in the creation of a model is to establish the number of significant independent variables that are being used. An insufficient number of variables makes an adequate description of the occurrence impossible, whereas an excessive number of variables decreases the credibility of the model and makes it “too sensitive”. In this study, the “dominant variable” is defined and its impact on the local commercial real estate market is shown. The study also has a practical dimension, since the results of the research apply to the deliberations concerning the “Recommendation J” and may also provide a comprehensive source of information for the local authorities and national government by showing the results of planning decisions in a simple and clear manner. Real estate value determination requires the acquisition of a proper store of information, including spatial and market information. Because of the intensive real estate market development in Poland, the issue has emerged of the availability of this information and software which allows its proper processing. Information systems intended for real estate appraisers, realtors, real estate managers or banks are currently functioning. With the development of this software, GIS functionality has become a part of this system. Spatial information systems allow many advanced spatial analyses to be performed, which are necessary, among others, in the real estate value determination process. This study presents and compares the functionality of selected existing spatial information systems. Their basic functions and the preferences of their users are presented as an analysis result, which can contribute to further development of systems supporting both real estate appraisal and management. The real estate market is extremely complex, which makes it difficult to develop an objective method of price and value modeling or evaluation of the effect of individual attributes on their formation. Statistical methods and models allowing the analysis of regularities concerning relationships in time and space can be extremely useful in this case. One of the methods, which may find broad application for real estate market analysis, is discriminatory analysis, which enables the selection of attributes for market division into relatively homogeneous groups. The experimental application of discriminatory and classification methods which is presented in this paper allows, among others, the verification of the correct selection of a real estate using a database of real estate properties similar to the one being appraised. The advantage of the method is the possibility of verification and classification, at the selected probability level, of every real estate property into a precisely-defined group. Contemporary problems of appraisal and value-based real estate management should be considered in a broad international context, especially in today’s world, in which the mobility of entities and capital is less and less limited by political, economic or administrative barriers.
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