A Fuzzy Knowledge-Based Framework for Risk Assessment of Residential Real Estate Investments

Abstract

Abstract. Risk analysis of residential real estate investments requires careful analysis of certain variables (or determinants). Because real estate is a key sector for economic and social development, this risk analysis is seen as critical in supporting decision processes relating to buying or selling residential properties, partly due to the pressures caused by the current economic environment. This study aims to develop a conceptual reference model for risk assessment of residential real estate using fuzzy cognitive mapping. This fuzzy model allows cause-and-effect relationships between determinants to be identified and better understood, which in turn allows for better informed investment decisions. The results show that the use of cognitive maps reduces the number of omitted criteria and favors learning with regard to how the criteria relate to each other, holding great potential and versatility in structuring complex decision problems. Practical implications, strengths and weaknesses of our proposal are discussed.

Barriers to Real Estate Investments for Residential Rental Purposes: Mapping Out the Problem

“…These results reinforce some of the results presented by Minli and Wenpo (2012), who identified the following real estate investment concerns, using a different methodology: (1) political risks and market oscillations; (2) investment risks (i.e. the costs inherent to the entire process, both initial and maintenance); (3) location risks; and (4) type of investment (see also Ribeiro et al, 2017). The results obtained in the current study add to previous research, however, in terms of the identification of more criteria, including more subjective criteria which are often overlooked.…”

“…As demand for rentals increase, so do the opportunities for investment for such purposes. However, it is known that just as it can provide high returns to investments, the real estate market also presents high levels of risk (Ribeiro, Ferreira, Jalali, & Meidutė-Kavaliauskienė, 2017).…”

“…One of the key limitations in this regard has been the overwhelming use of methodologies based on statistical techniques and mathematical objectivity, which while of great value, exclude from the analysis the subjective dimension of risk measurement (Brown & Young, 2011;Ferreira, Santos, Rodrigues, & Spahr, 2014;Ribeiro et al, 2017). It is hoped that the methodology used in the current study can help bridge this gap, through recourse to techniques which explicitly incorporate subjectivity, and not only identify the determinants of a given decision problem, but also the cause-and-effect relationships between them.…”

Real Estate Risk Analysis: The Case of Caserma Garibaldi in Milan

“…This is the path that the estimative sector is taking, with the development and the application of real estate valuation tools, such as the International Valuation Standards (International Valuation Standards Council 2013) and the European Valuation Standards (TEGoVA 2012) and, more recently, of real estate risk rating tools (Manganelli et al 2014;D'alpaos and Canesi 2014;Ribeiro et al 2017;Zheng et al 2015;Benedetto 2015;Jiang et al 2007). Among these it is worth mentioning, since it is more widespread and better structured, at the European level, the Property and Market Rating developed by TEGoVA in 2003(TEGoVA 2003, and, at the national level, the Real Estate Risk (RER) proposed by Cacciamani (Cacciamani 2003).…”

A Hybrid MCDM Technique for Risk Management in Construction Projects

“…In recent decades, projects in the construction sector have become more complex and risky due to the diverse nature of activities among global companies [1][2][3][4][5][6][7][8]. In comparison to other sectors, construction projects encounter more risks due to uncertainties occurring because of various construction practices, working conditions, mixed cultures and political conditions between host and home countries [9][10][11][12].…”