How can you evaluate investment opportunities in emerging market real estate?

2 Identify the market segments

The next step is to identify the market segments that offer the most attractive investment opportunities in the emerging market. These segments may vary depending on the type, location, quality, and price of the properties, as well as the characteristics and preferences of the tenants and buyers. You can use market research, surveys, interviews, and site visits to collect and analyze data on the supply and demand, occupancy and vacancy rates, rental and sales prices, and growth and competition of the different market segments. You should also evaluate the strengths and weaknesses of the existing and planned properties in each segment, as well as their competitive advantages and disadvantages.

3 Estimate the cash flows

The third step is to estimate the cash flows that you can expect from investing in a specific property or portfolio in the emerging market. This will help you determine the profitability and feasibility of the investment, as well as the risks and uncertainties that may affect the cash flows. You can use financial models, such as discounted cash flow (DCF) analysis, to project the income and expenses of the property or portfolio over a certain period of time, based on the assumptions and scenarios that you have derived from the market analysis. You should also consider the effects of currency exchange rates, inflation, taxation, and financing costs on the cash flows.

4 Calculate the returns

The fourth step is to calculate the returns that you can expect from investing in a specific property or portfolio in the emerging market. This will help you compare the investment with other alternatives and assess its attractiveness and suitability for your investment objectives and risk appetite. You can use various metrics, such as internal rate of return (IRR), net present value (NPV), equity multiple, and cash on cash return, to measure the returns of the investment, based on the cash flows that you have estimated. You should also adjust the returns for the risks and uncertainties that may affect the investment, such as market volatility, liquidity, currency risk, and political risk.

5 Conduct due diligence

The fifth step is to conduct due diligence on the property or portfolio that you are planning to invest in the emerging market. This will help you verify the accuracy and validity of the information and assumptions that you have used in the previous steps, as well as identify and mitigate any potential issues or problems that may arise from the investment. You can use various methods, such as inspections, audits, appraisals, valuations, and legal reviews, to examine the physical, financial, operational, and legal aspects of the property or portfolio. You should also check the reputation and track record of the seller, developer, manager, and other parties involved in the investment.

6 Negotiate the terms

The sixth step is to negotiate the terms and conditions of the investment with the seller, developer, manager, or other parties involved in the property or portfolio in the emerging market. This will help you secure the best possible deal and align the interests and expectations of all the stakeholders. You can use various strategies, such as bargaining, persuasion, compromise, and collaboration, to negotiate the price, payment, timing, ownership, management, and other aspects of the investment. You should also prepare and review the contracts, agreements, and documents that will formalize and finalize the investment.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?