Property cash flow studies : focusing on model consistency and data accuracy

Boyd, Terence (2003) Property cash flow studies : focusing on model consistency and data accuracy. In Pacific Rim Real Estate Society - 9th Annual Conference, 19-22 January 2003, Customs, House, Brisbane, Queensland.

Abstract

The high degree of variability and inconsistency in cash flow study usage by property professionals demands improvement in knowledge and processes. Until recently limited research was being undertaken on the use of cash flow studies in property valuations but the growing acceptance of this approach for major investment valuations has resulted in renewed interest in this topic. Studies on valuation variations identify data accuracy, model consistency and bias as major concerns. In cash flow studies there are practical problems with the input data and the consistency of the models. This study will refer to the recent literature and identify the major factors in model inconsistency and data selection. A detailed case study will be used to examine the effects of changes in structure and inputs. The key variable inputs will be identified and proposals developed to improve the selection process for these key variables. The variables will be selected with the aid of sensitivity studies and alternative ways of quantifying the key variables explained. The paper recommends, with reservations, the use of probability profiles of the variables and the incorporation of this data in simulation exercises. The use of Monte Carlo simulation is demonstrated and the factors influencing the structure of the probability distributions of the key variables are outline. This study relates to ongoing research into functional performance of commercial property within an Australian Cooperative Research Centre.

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ID Code: 24569
Item Type: Conference Paper
Refereed: Yes
Keywords: CRC for Construction Innovation, Program C : Delivery Management of Built Assets , Project 2001-011-C : Evaluation of functional Performance of Commercial Buildings eValuBuild
Divisions: Past > QUT Faculties & Divisions > Faculty of Built Environment and Engineering
Past > Schools > School of Urban Development
Copyright Owner: Copyright 2003 Icon.Net Pty Ltd
Copyright Statement: The Participants of the CRC for Construction Innovation have delegated authority to the CEO of the CRC to give Participants permission to publish material created by the CRC for Construction Innovation. This delegation is contained in Clause 30 of the Agreement for the Establishment and Operation of the Cooperative Research Centre for Construction Innovation. The CEO of the CRC for Construction Innovation gives permission to the Queensland University of Technology to publish the papers/publications provided in the collection in QUT ePrints provided that the publications are published in full. Icon.Net Pty Ltd retains copyright to the publications. Any other usage is prohibited without the express permission of the CEO of the CRC. The CRC warrants that Icon.Net Pty Ltd holds copyright to all papers/reports/publications produced by the CRC for Construction Innovation.
Deposited On: 17 Jun 2009 14:35
Last Modified: 09 Jun 2010 13:48

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