AHP – Binary Linear Programming Approach for Multiple Criteria Real Estate Investment Planning

Abstract

Capital allocation on real estate investments must be made after careful consideration. An investor can obtain a great amount of revenue with a good investment, however, an investment can result by waste of capital, which is spent on an unprofitable asset. There are different aspects of investments related to economic, legal, location and physical factors, which should be taken into account in assessment of possible investment options. In this study, real estate investment planning problem is considered as a multi-objective knapsack problem. An integrated AHP – Binary Linear Programming model is proposed to determine the best investment plan considering different criteria simultaneously. Within the proposed model, multi-criteria evaluation of investment alternatives is done by using Analytical Hierarchy Process and obtained criteria weights values are written as the objective function coefficient in the knapsack model. A real estate investment planning application, which contains 10 alternatives in Ankara, is presented to test the applicability of the proposed decision model. Obtained results are compared with the results obtained by only considering financial aspects of investment. 

Keywords

• investment planning,integer programming,multi-criteria decision making

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