Valuing Direct Real Estate Investments by Using the ADAM Modelling Approach

In the Czech Republic the building is considered part of the land on which it lies. Consequently there can be owners of land and buildings being various natural or legal persons. Since 2014 there was a reform of the Czech Civil Code, which leads to the gradual consolidation of property ownership (land and buildings). In the usual case, the division of property on land and buildings in the Czech Republic and the subsequent consolidation efforts constitutes a need for assessment of the relevant investments. Income based model to assess the direct real estate investments (Asset Dividing Appraisal Model, ADAM) presented in this article is based on the methods of measurement values and calculating return on investment, and offers the possibility of investment by real estate appraisal in the background above the consolidation of ownership in the Czech Republic. In doing so, ADAM model combines the approaches to the valuation of property in continental Europe (German yield method) and international approaches, such as the capital market based discounted cash flow method. The objective of the model ADAM is to evaluate direct investments in real estate (land and buildings) and the resulting cash flows, rather than the determination of its current market value.