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

Year 2019, Volume: 3 Issue: 2, 283 - 289, 31.12.2019

Billur Ecer , Ahmet Aktas , Mehmet Kabak

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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