Risk and profitability in residental investments

The Master’s thesis discusses risk and profitability in residential investments in different \ud Slovenian regions. In today’s modern and dynamic business world, the question how to find \ud risk and profitability in residential investments is becoming a burning issue. The financial \ud theory about risk and profitability was developed in the late 1950s out of institutional \ud investors’ needs. In the thesis, that theory was upgraded by using different investment criteria \ud and elementary tools to value risk and profitability in residential investments. Special attention \ud is paid to the characteristics of real estate investment, profitability of residential investments \ud and previous residential offer in Slovenia, because the hypothesis is that the profitability and \ud risk in a portfolio composed only of different residential types, is higher in central Slovenian \ud region than in other regions. A questionnaire carried out among randomly selected landlords \ud gave us all the necessary data for risk analysis and profitability in residential investments in \ud different Slovenian regions and data about residential offer in Slovenia. The analysis showed \ud which residential real estates are the most profitable. Expected profitability and risk index in \ud several regions according to a simulation scenario was also defined. In the following chapters, \ud upgraded investment possibilities into residential real estate through residential portfolios are \ud presented. Some combinations offer an optimal ratio between profitability and risk. Data about risk and profitability are needed when making investments in real estate (portfolio composed \ud of real estate) as well as mixed investments (portfolio composed of real estate, stocks and \ud debenture shares). To assure high profitability of investment in real estate, a choice of optimal \ud real estate portfolios is suggested. Residential real estate in central Slovenian region has \ud negative profitability. Therefore, our hypothesis that the profitability and risk in a portfolio \ud composed only of different residential types is higher in central Slovenian region than in other \ud regions can be rejected