Rating in the assessment of investment property

Abstract

The implementation of rating procedures is associated with searching for tools that provide an objective and standardized assessment of investment risk. For this reason, rating is an important and often essential element of investment decision-making processes which determines the development of the capital market, including the real estate investment market. In the investment property market, not only does rating provide transparency of property risk, but it can also be used for real estate portfolio analysis, investment controlling, and the analysis of factors determining investment decisions (ESV 2012). In this article, the authors present an assessment of the suitability of the rating recommended by TEGoVA for properties considered as active investments, namely properties in the course of development and intended for future development projects. The analysis will include criteria affecting the assessment of property quality and risk, taking into account four classes: market, location, property characteristics, and the quality of cash flows. The study will allow to identify assessment parameters and determine a recommended scope for the analysis of real estate investment potential.