Comparative Analysis between an Investment in Real Estate Project

and Conservative Financial Assets

Marquicilandro Dos Santos Filho1, Ícaro Freitas de Assis2

1
Universidade de Fortaleza - UNIFOR, 117 sea island ln. Boca Raton, FL, 33431,
mtsantosfilho@gmail.com
2
UNIFOR, icarofreitas14@hotmail.com

ABSTRACT

Construction plays a fundamental role in the Brazilian economy, responsible for a huge part of the GDP
and the country’s employment rate, as the construction depends on a prosperous economy to reach growth.
Brazil is living a period of economic crisis, but even in a period like that, construction and real estate
development companies need to search options to keep growing, so it is necessary to carry out financial
analysis in the construction industry in order that the companies succeed in realize their investments with
the highest successful rate. This academic work performed a case study with the objective of analyzing an
investment in the real estate market from the resolution of the feasibility of a real estate development based
on economic indicators like Net Present Value, Intern Rate of Return, and payback. The work has an
introduction with objectives, methodology, and current panorama, has a bibliographic reference with
overview of the real estate projects, real estate development, analysis of investments with formulas for
calculation, market analysis, feasibility study and other investment options. A case study was accomplished
of a housing set in the city of Russas / CE, with characteristics of the MCMV program, using a parametric
budget based on the CUB, a cash flow and a construction schedule. It was guaranteed that the enterprise is
feasible from the economic and financial point of view. An income table was prepared for the other four
types of investments available in the Brazilian market and the economic indicators were calculated. After,
the investment of the case study was compared with the other types of investments and it was verified that
the real estate investment is more profitable than the others. At the end the conclusions were made and
recommended subjects for future work.

Key-words: Investment Analysis, Real Estate, Feasibility.

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1. INTRODUCTION

While in 2008 there was a crisis in the United States real estate market, the Brazilian market o
Brazil it showed signs of economic growth and the real estate market was align with the trend
creating a suitable environment to real estate acquisition.
In this stable moment, the government created the program: “Minha casa, minha vida (My House,
My life – Brazilian Affordable Housing program)”, with the intention of minimizing the Brazilian
housing deficit. Taking advantage of these incentives, many entrepreneurs emerged in the
construction industry through the activity of developing real estate projects that would meet the
requirements demanded by the program, generating economic growth in the real estate market and
thereafter in the Gross Domestic Product of Brazil.
However, in 2014, with the retraction of the economy and the political movement, the field entered
a recession and through research from the Institute of Education and Research (Insper), it was
observed that between the months of December 2010 and September 2014 average return on equity
(ROE), which indicates how much the company was able to make in profit compared to the
invested, fell from 15.4% per year in 2010 to 0.4% per year in 2014. The study was carried out
with the publicly-held companies. (AMORIM, 2015).
In the following years, the number of releases decreased, and the number of broken contracts
increased. Large construction companies had to cut costs to honor commitments and at the same
time they could not stop launching new developments on the market, otherwise they would
increase the risk of losing market share.
E These data are relevant because the construction sector is extremely important for the country,
due to the fact that it is a large employer in Brazil, with a direct influence on the economy, social
development, infrastructure and many other sectors, so this market needs to be always on the rise
because any setbacks can have an effect on all other fields.
The construction market, at the beginning of the decade (2010), had a growth in the number of
new developments, real estate was being developed in all cities, with high acceptance and speed
of sales. During this period many entrepreneurs used only their experience in previous projects to
make crucial decisions regarding their enterprise, without having the dimensions of the economic
impact that the decision would generate, especially in small and medium companies.
Currently, 2017, in spite of the growth caused by the deceleration of inflation, and the forecast of
the reduction of interest rates generating a promising environment to the growth of the real estate
market, it is necessary to develop an economic feasibility analysis in order to develop a new project
according to with the needs of the market, to achieve a positive result in sales, a high rate of return,
thus making the investment more secure and reliable.
1.2. Justificativa

Caution is required when making an investment, because every investment carries with it risks and
rewards, and with real estate ventures is no different. It is necessary to analyze the return time, net
present value, minimum acceptable rate of return, cash flow in addition to other indicators, but it
is exactly in the financial investment indexes that the greatest misconduct occur, both in small and
large construction companies.
The role of the feasibility study is to help minimize risks, increase the reward, predict revenues
and disbursements in advance so the investor is more secure in his investment.
Seeking to continue activities or even growth in the face of the crisis, it is necessary to study
economic feasibility before launching projects, as it is extremely important that developers and
investors seek to plan and conduct good business management when deciding the characteristics
of in order to make the sales stage a success.

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A more specific analysis using indicators and cash flow allows the investor to make a production
planning, use of resources and control of profitability parameters, which makes the entrepreneur
more confident in decision making.
The real estate is a market that offers a lot of risk to the investor because it involves a large capital
input, a slow payback, numerous uncertainties regarding demand and very low liquidity, in
compensation it offers one of the best returns when compared to other investment modalities.
(Schorr, 2015)
The risk of error that would result in a capital loss shows that the investor / developer needs to go
beyond technical knowledge, he must be aware of the economic factors that influence his work,
such as construction financing, cash flow, economic indicators, market analysis, sales and
marketing strategies, among other business topics. All of these risks can be mitigated by careful,
detailed, and assertive analysis, linking empirical knowledge conquered by the entrepreneur with
the theorist of industry experts.
Using financial planning, the entrepreneur, already in the design stage of the project can verify its
viability. With knowledge of the economic and financial factors, the developer is able to carry out
the project in addition to planning its actions, thus achieving greater profitability and customer
satisfaction.
The investor should bother to carry out his feasibility analysis using all the necessary factors and
keep in his file, indicators of past works, in order to obtain data closer to his reality.

2. METHODOLOGY

For this case study we studied a housing project located in the city of Russas / CE. The project is
focused on serving low- and middle-income families that fit into the Federal Government's "Minha
Casa, Minha Vida" program, which in 2017 finances properties of up to R$ 130,000.00 for cities
between 50,000 and 100,000 inhabitants. The choice to attend the program occurs because of the
interest rates and the ease of credit that the buyers can receive.
The developer of the project made available the floor plans, from which the economic indicators
were calculated and the study was carried out.

2.1. The Development

The project will be located at Avenida Coronel Antônio Cordeiro S/N, in the city of Russas,
located in the Jaguaribe mesoregion, Ceará. (Image 1). The project was approved by the Russas
City Hall, in accordance with the Russas Land Use and Occupancy Law.
Image 1: Location

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The enterprise analyzed in this study has a land with an area of 37,821.72 square meters, divided
into ten blocks, with dimensions varying from 609.05 square meters to 4,465.76, as shown in
Attachment A.
Each unit has a land area of 128.35 m² (138,154.79 sqft.), a built area of 63.85 m² (68,727.568
sqft.) and a land use rate of 0.50, which is align with the Land Use and Occupancy Law of the city.
The house has two bedrooms, one suite, two bathrooms, living / dining room, balcony, kitchen,
circulation, service area, internal drive and yard (Image 2)
Image 2: Floor Plan

2.2. Sales Price

The first step was the adoption of a sale price in order to determine the costs inherent to the
enterprise. The selling price adopted in this case study was the average market price provided by
the entrepreneurs that through market research in the region of Russas / CE, and data from the
Caixa Econômica Federal (Government Bank). The average price for properties with the same
standard as that used in this case study for the Russas / CE region was R$ 1,500 per square meter
of equivalent area.
The equivalent area of each unit of the present study is 64.44 m², and a total of 120 houses. The
total equivalent area of 7,732.80 m² and the Total Sales Price (equivalent area multiplied by the
cost per square meter) of R$ 11,599,200.00.
The value of each unit for sale will be R$ 96,660.00 which according to market analysis is
compatible with the price of real estate with the same standard in the region.
The table below (table 1) shows a sales price summary:

Table 1: Sales Price Summary

Number Equivalent Price

Unit Total
of Units Area [m²] [R$/m²]
Standard
120 64,44 R$1.500,00 R$11.599.200,00
Unit
Total Sales Price R$11.599.200,00

Sales price per Unit R$96.660,00

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2.3. Parametric Budgeting

In order to reach the budget, a methodology based on NBR 12721 (ABNT, 2006) was adopted,
which calculates, through conversion factors, the equivalence of areas according to the standard,
which will be multiplied by a value per square meter adopted, in the case of the study the value
adopted will be the CUB (Basic Unit Cost) calculated for the state.
All areas were considered "standard private area", with the exception of the balcony, which used
a coefficient of 0.75 because it presented a lower standard when compared to the rest of the sample.
In the service area, the factor used was 0.50 and in the yard the factor used was 0.10. As a result,
the total equivalent area of the building was 64.44 m².
The building standard considered in the present study was a PIS type building, since it presents
the value closest to the value realized in previous projects of the construction company. It was
used the CUB for the month of March 2017 for a residential building, low standard, whose value
per square meter is R$ 776.37, and this value is obtained on the website of the Union of Civil
Construction Industry of the State of Ceará (SINDUSCON-CE).
The cost of constructing each unit was found in the multiplication of the Basic Unit Cost (CUB)
by the equivalent area. The cost for the construction of the units was valued at six million, three
thousand, five hundred and fourteen reais and twelve cents (R$ 6,003,514.94).
In the table below (Table 2), the following is a summary of the cost of construction of the project
analyzed:
Table 2: Construction Cost using the parametric budget

Construction Number Equivalent

Price/m² Total
Cost of Units Area (m²)
Standard
120 64,44 R$776,37 R$6.003.513,94
Unit

Construction Cost per unit R$50.029,28

The land purchase was made in 2015 and according to information obtained with the partners of
the construction company responsible for the work, the land value of this project is 15% of the
Gross Sales Value (GSV), totaling R$ 1,739,880.00.
As a cost to carry out the project, tax costs were also used, corresponding to the collection of all
the taxes, being paid as cash receipts are received. Tax costs are 6% of the Gross Sales Value
(GSV).
During the sales period, marketing actions will be carried out, such as painting of walls,
distribution of leaflets and sales booth, totaling, according to estimates, 1% of GSV.
For the commercialization of the units, a partnership is planned with a real estate brokerage firm
in which it will receive a commission, each unit sold, worth 4% of the selling price.
For the execution of the projects will be contemplated a sum of 1% of the GSV. This amount
counts the execution and approval of the sanitary, electrical, architectural and structural projects.
For the management in and off site, including costs with engineer, consultancy, legal advice,
development of the project, and other values related to monitoring the work will be allocated
resources equivalent to 3% of the GSV.
The land does not have the necessary infrastructure to carry out the project, being essential the
execution of water and sewage piping, electricity grid, telephony and asphalt. The estimated cost
for the execution of these services will be $ 30.00 per square meter of lot. The value was
determined based on the past experiences of the entrepreneurs.
In the table below (Table 3), a summary of the adopted parameters in this budget:

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Table 3: Summary of the Adopted Parameters

FEASIBILITY
Tax 6% R$695.952,00
Marketing 1% R$115.992,00
Sells commission 4% R$463.968,00
Projects 1% R$115.992,00
Management 3% R$347.976,00
Infrastructure R$30,00 /m2 R$1.134.651,60
Viability cost R$2.874.531,60

Below is table 4 with the summary of the overall budget carried out as described above:

Table 4: Budget Summary

Budget
Total Land Cost R$1.739.880,00
Construction Cost R$6.003.513,94
Viability Cost R$2.874.531,60
Total Cost R$10.617.925,54
Cost per Unit R$88.482,71

As seen in the table, the cost of the land was R$ 1,739,880.00, the construction cost R$
6,003,513.94 and the total feasibility was R$ 2,874,531.60, with a total cost for the realization of
the project in R$ 10,617,925.54, and the total cost of the project divided by the number of units
(120) resulted in a value of R$ 88,482.71 for each unit.

2.4. Cash Flow

After making the parametric budget and determining the sale price, the projection of the flow of
expenses and revenues that will be generated monthly during the lifetime of the project.
For the determination of the cash flow, a schedule is necessary to determine the period during
which the investment will take place. The term of the total work was estimated in 20 months, being
this subdivided in 12 steps, each stage contemplating the construction of 10 houses. The
construction of 10 houses according to the previous experience of the entrepreneurs and the
planning made by them, lasts forty-five consecutive days.
The financing of the units will be realized directly with the Federal Savings Bank (Caixa
Economica Federal) through the "Minha Casa, Minha Vida" program. The contract is made
directly between the bank and the costumer (purchaser), and the contractor receives the payment
30 days after delivery and inspection of the property.
Taking into account a good sales speed, thanks to the need for real estate in the region and the
advantages established by the federal government for low and middle income families, was
elaborating a schedule of execution and payments for the project in question, as shown in Fig. 3
below.

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Figura 3: Cronograma Construção X Pagamento

The next step is estimate the cash flow of the real estate development presented in this study, the
same will be used as the basis for the determination of all economic indicators that will serve to
perform the comparative analysis with other investment options.
The cash flow contains on the horizontal axis the expenses and revenues, in reais, and on the
vertical axis, the elapsed time, in months.
In order to define this flow, the expenses with marketing, projects and infrastructure were
considered as expenses and pre-construction costs. Costs with marketing and projects are
considered to be fully spent in month zero of this cash flow, in contrast, infrastructure costs are
divided in three months, each month costing R$ 378,217.20.
The next item is the one referring to the land, which in the case study cost the equivalent of R $
1,739,880.00 (15% of the GSV, as described previously).
In the next column is calculated the construction management fee that represents 3% of the PSV.
The value was found by multiplying the GSV by 0.03 (3%), dividing this value by 120 (number
of units), finding the proportional value of the management fee for each unit. Soon after this value
is multiplied by 10 that represents the number of houses built in a cycle and then multiplied by 2/3
because it is the proportional amount of how much is done in a month of construction of the cycle,
thus finding R$ 19,332.97 a management fee for one month's work.
The construction cost is calculated as: the cost of work per unit, previously calculated (R$
50,029.28), multiplied by ten (number of houses in one cycle) and multiplied by two thirds
(percentage completion of the cycle in one month), finding the amount of R$ 333,528.55 referring
to the cost for construction, per month of work.
The next step is to determine the sales commission and sales taxes that will occur only in the
months in which payments will be received according to the stipulated schedule. The commission
paid for the real estate is calculated as 4% of the value of the sale and the taxes paid to the
government is 6%. Then the total number of disbursements for that month is added together.

 Page 7 of 18

The next column refers to revenues, which in the case of this study refer to the payments received
from Caixa Econômica Federal, thirty days after the delivery and inspection of the units to the
buyers.
The next column is the cash flow for the month plus revenues and disbursements showing a
positive value if revenues are greater than expenses and negative if the reverse happens. Soon
after, the accumulated cash flow is realized, in which it sums all the cash flows up to the moment.
The cash flow of the venture is shown in Table 5
Table 5: Summary of the Cash flow

Total of Cumulative Cash

Month Revenues Cash Flow
Disbursements Flow
0 (R$2.350.081,20) (R$2.350.081,20) (R$2.350.081,20)
1 (R$731.078,72) (R$731.078,72) (R$3.081.159,92)
2 (R$731.078,72) (R$731.078,72) (R$3.812.238,64)
3 (R$449.521,52) R$966.600,00 R$517.078,48 (R$3.295.160,16)
4 (R$352.861,52) (R$352.861,52) (R$3.648.021,67)
5 (R$449.521,52) R$966.600,00 R$517.078,48 (R$3.130.943,19)
6 (R$449.521,52) R$966.600,00 R$517.078,48 (R$2.613.864,71)
7 (R$352.861,52) (R$352.861,52) (R$2.966.726,23)
8 (R$449.521,52) R$966.600,00 R$517.078,48 (R$2.449.647,75)
9 (R$449.521,52) R$966.600,00 R$517.078,48 (R$1.932.569,27)
10 (R$352.861,52) (R$352.861,52) (R$2.285.430,79)
11 (R$449.521,52) R$966.600,00 R$517.078,48 (R$1.768.352,30)
12 (R$449.521,52) R$966.600,00 R$517.078,48 (R$1.251.273,82)
13 (R$352.861,52) (R$352.861,52) (R$1.604.135,34)
14 (R$449.521,52) R$966.600,00 R$517.078,48 (R$1.087.056,86)
15 (R$449.521,52) R$966.600,00 R$517.078,48 (R$569.978,38)
16 (R$352.861,52) (R$352.861,52) (R$922.839,90)
17 (R$449.521,52) R$966.600,00 R$517.078,48 (R$405.761,42)
18 (R$449.521,52) R$966.600,00 R$517.078,48 R$111.317,07
19 R$0,00 R$0,00 R$111.317,07
20 (R$96.660,00) R$966.600,00 R$869.940,00 R$981.257,07
(R$10.617.942,93) R$11.599.200,00 R$981.257,07 R$981.257,07

The investment in the project takes place in the first three lines, being R $ 2,350,081.20 in month
zero, R$ 731,078.72 in months one and two. According to the forecast it is possible to verify that
the total investment that will be made for the execution of the enterprise will be R$ 3,812,238.64,
being characterized as the largest negative value of the cumulative cash flow (month 2), after that
month the payments referring to the sales of real estate made by the bank begins.

3. RESULTS
For the economic analysis of the construction project under discussion, the calculations of the
economic indicators, were done in order to indicate if the project will bring satisfactory financial
returns to the developer financial plan.
The choice of indicators follows the model adopted by Trevisan (2016). The indicators adopted
were:
Ø Minimum Acceptable Rate of Return (MARR): It is an adopted interest rate that
represents the minimum that the investor is willing to receive from an investment

 Page 8 of 18

Ø Net Present Value (NPV): It is the difference between the present value of the revenue
and the present value of the expenses. The rate used to discount the flow (bring to the
present value) is the TMA, as seen previously. In the case of a positive sum, the
investment will be feasible based on the minimum rate adopted. The NPV calculation
follows Eq. 1.
. &'(
𝑁𝑃𝑉 = /01 (*+,)( (1)
Ø Internal Rate of Return (IRR): Rate that zeroes the NPV, being a rate of return of the
investment, calculated according to Eq.2 .
. 3'( . 7'(
0 = /01 (*+455)( − /01 (*+455)( (2)
Ø Payback: Period in which the project will take to return the amount invested.

For this study, the SELIC (Federal Interest Rate) rate was used as the Minimum Acceptable
Rate of Return (MARR), the rate that targets the majority of conservative fixed income
investments, and that at the time of the study was 11.25% APR.
The economic indicators were calculated in the cash flow presented above. The result of the
calculations is in Table 6 below.

Table 6: Cash flow with indicators

As seen in Tab. 6, payback happens in a satisfactory period. The NPV is positive, configuring that
the project is viable, since it demonstrates that it has a higher yield than the MARR. The internal

 Page 9 of 18

rate of return (IRR) of 26.23% annually confirms the high profitability of real estate investment,
making it feasible.

3.7 Alternative economic indicators elaboration

The feasibility study served to determine if the option to build the venture would be viable, but it
is also necessary to check if there would be other options that would return a higher profit and a
lower risk.
To be sure, a comparative study with other investment options is required. For this work, 4 types
of investments were chosen for the national market: savings accounts, Certificate of Deposit (CD),
Treasury Savings Bond and Stock Investment Fund, in order to verify if the alternative to build
the project is the best alternative.

3.7.1. Savings Account

The first type of investment analyzed was the savings account, which although many experts did
not consider it as a type of investment due to its low profitability, which in some years was lower
than inflation meaning that capital lost value in the period it was applied.
The importance of making a comparison with saving comes from the fact that this type of
investment is the most popular in Brazil, being easy to see its comparison with other investments.
For the analysis of the savings account, as well as the other investments in this comparison, three
capital contributions were considered as described below:

Ø Month zero: R$ 2.350.081,20

Ø Mont one: R$ 731.078,72
Ø Month two: R$ 731.078,72
Ø Total contribution: R$ 3.812.238,64

The choice of values was determined according to the investments predicted in the cash flow of
the case study previously verified in Table 5.
By way of comparison, the payback period was chosen as the payback period in month 20. The
choice of month 20 is based on the fact that the construction and sales forecast in the case study of
this work is expected.
The cash flow was determined as zero in the months in which there is no return of capital to the
company, since the return of capital happens only in month 20, month of the redemption.
The interest rate published by the Central Bank (2017) for savings was 7.31% annually for legal
entities, income tax of 22.5% is charged quarterly on the income.
Table 7 shows the income table using the same period and the same investment as the case study
and a summary of the calculated economic indicators.

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Table 7 – Savings Account income projection

Using the analysis of the economic indicators it is possible to verify that the investment of the
amount in a savings account is not viable because the NPV is negative and the IRR is very low
(5.63%), lower than the MARR.

3.7.2. Certificate of Deposit (CD)

Another very popular investment among Brazilians is the investment in CD, since it presents low
risks. To be used in the comparison was used a certificate issued by “Banco Agiplan”, which pays
100% of the CDI rate, an intermediate value of the available options.
For use in this comparative study, it is used 21 working days per month per convention. The CDI
according to April 2017 data is 11.30% annualy. (CETIP, 2017), with a rate of 0.041886% per day
for calculation purposes.
The investment values and the term of investment application follow as a parameter the cash flow
of the case study (Table 6), as well as the percentage of income tax that for the period is 17.5%.
Table 8 shows the returns on the use of this type of investment:

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Table 8 – CD income projection (100% CDI)

Visualizing the previous image it is possible to verify that the NPV is negative and the IRR is low,
characterizing an investment not feasible from the point of view of the planning.

3.7.3. Treasury Savings Bond

The next investment used in the comparison is Treasury Direct, which presents low risk. The
chosen title was Treasury Bound 2023 (LTN), which currently has a yield rate of 10.37% annually
due on 01/01/2023.
The direct treasury has an entrance fee of 0.1% of the amount invested, in addition to a custody
rate of 0.3% per year, in addition to a pre-maturity service charge. The contributions, investment
period and income tax rate follow previous ones.
The next table (Tab.9) shows the yields with the use of the Bond:

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Table 9: Treasure Bond income projection

From the indicators found it is possible to affirm that the investment in this type of Public Title is
not viable in the point of view of the financial planning of the company.

3.7.3. Stock Investment Fund

Another option used for comparison was a stock investment fund managed by the Brazilian Bank
(“Banco do Brasil”), with a focus on the investment in paper that makes up the IBOVESPA (São
Paulo Stock Market Exchange) index of several sectors, with the name "BB AÇÕES IBOVESPA
INDEXADO".
The fund is categorized as being a high risk fund (category 5, in a range ranging from 1 to 5), has
an administration rate of 2.5% annually and the income is taxed 15% at the time of the redemption.
The accumulated income of the last 12 months, according to April 2017, is of 18.65% annually,
that equals 1.44% monthly. (Banco do Brasil, 2017).
Next, the Table 10 with the income forecast, if the capital and time of the previous simulations are
invested in the fund:

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Table 10 – Income projection for BB AÇÕES IBOVESPA INDEXADO

The investment in the stock fund was economically feasible for the company, but it should be
taken into account that this type of investment is considered a high risk because it is a variable
income investment with high market volatility.

3.8 Comparative analysis between alternatives

Using the analysis of predicted economic indicators, the case study project is seen as viable, since
it presents all positive indicators for the profitability defined by the company.
The net present value of the project was positive and quite high, showing a superiority of the
mentioned investment compared to other conservative fixed income investments, such as the
Treasury Bond.
The internal rate of return (IRR) was up 26.23% per month, creating an investment that will
generate high profits for the entrepreneurs. Payback, although far from ideal, is positive and
common in this type of investment.
When compared to other types of available investments the case study investment was also higher
as shown by the graphs.

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The Graph 1 shows a comparison with respect to the payback of each option
Graph 1: Payback Comparison

Payback
25,00

20,00

15,00

10,00

5,00

0,00
Savings Stock
Real Estate CD Bond
Account Investment
Série1 17,78 20,00 20,00 20,00 20,00

Considering the payback, all other options, as mentioned above, return the investment only at the
time of the redemption, unlike the real estate development that receives inflows as the bank (Caixa)
makes the payments.
The Graph 2 compares the sum of the Net Present Value (NPV) of each option.

Graph 2: NPV Comparison

Net Present Value

R$600.000,00
R$500.000,00
R$400.000,00
R$300.000,00
R$200.000,00
R$100.000,00
R$0,00
(R$100.000,00)
(R$200.000,00)
(R$300.000,00)
(R$400.000,00)
Savings Stock
Real Estate CD Bond
Account Investment
Série1 R$495.382,51 (R$305.273,78 (R$110.683,39 (R$164.649,96 R$165.250,36

 Page 15 of 18

NPV was only positive in two cases (Real Estate Development and the Investment Fund), which
were the only cases that met the requirements of the financial planning adopted (MARR of 11.25%
annually).
As two projects presented feasible execution, the literature indicates that the project with the
highest NPV (Casarotto Filho and Kopittke, 2010) should be chosen, so based on that the
investment in the development is more advantageous from an economic point of view.
The next item to be analyzed was the Internal Rate of Return (IRR), which is the rate that zeroes
the Net Present Value and must present a value greater than or equal to the Minimum Acceptable
Rate of Return.
Graph 3 shows the comparison of the IRRs of the analyzed investments.

Graph 3: IRR Comparison

Internal Rate of Return

30,00%

25,00%

20,00%

15,00%

10,00%

5,00%

0,00%
Real Estate Savings Account CD Bond Stock Investment
Série1 26,23% 5,63% 9,23% 8,24% 14,22%

Through graph 3 it is possible to determine that the internal rate of return of the Development is
superior to all others, surpassing the MARR The IRR of the Stock Investment Fund (14.22%
annually), although smaller than that presented by the real estate, is also larger than the MARR,
being a project that meets the financial planning of the construction company.
Graph 4 compares the net profits obtained in each of the options of this comparison.

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Graph 4 – Net Profit Comparison

Net Profit
R$1.200.000,00

R$1.000.000,00

R$800.000,00

R$600.000,00

R$400.000,00

R$200.000,00

R$0,00
Real Estate Savings Account CD Bond Stock Investment
Série1 R$981.257,07 R$353.540,80 R$585.968,61 R$521.965,40 R$915.556,71

In the comparison of net income there is also a superiority of investment in real estate, as shown
in Graph 4.
As the aid of the graphs above mentioned it is possible to determine that the best investment option
is the real estate development project in Brazil, which this case study addressed, because of its
high yield, with a lower risk than the option with profitability nearest (investment fund).

4. CONCLUSION
Through the elaboration of this work it was possible to conclude that the investment in the real
estate market is very profitable and that with knowledge of finance and economy it is possible to
find alternatives to reduce costs and maximize the profits of those who decide to undertake in real
estate construction.
The parametric budget using the CUB provided by SINDUSCON proved to be an effective and
powerful alternative when analyzing an investment due to its practicality and speed, avoiding that
the budget phase is prolonged for a long time, but it is necessary to calculate an analytical budget
of the project in order to verify with certainty all the costs of the project.
The reduction in costs, even if small and without interfering in the overall quality of the project,
is essential because a small adjustment in costs would mean an intense change in the profitability
of the investment. It is necessary that the entrepreneur look for alternatives to reduce expenses, as
this will achieve the maximum potential of the real estate project, without losing the quality of the
project, after all this is of fundamental importance for the prosperity of the company.
Another important element is the economic indicators used in this work (IRR, NPV and payback),
showing to be extremely important when analyzing investments of such magnitude (as in the
example discussed in this paper). The indicators aim to direct the company in the decision of
capital immobilization, always helping it achieve its objectives outlined in economic and financial
planning.
It can be seen the importance of cash flow within a project, since it is due to the cash flow that we
can determine the balances during the execution period of an enterprise, as well as to analyze the
need to obtain external resources. A well-crafted cash flow will provide investment security and
ease of predicting potential capital shortages and borrowing.
Another factor that can be analyzed with this work is the importance of sales in the financial
security of an investment in real estate. The speed with which the product is sold exerts a direct

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influence on the profitability of the business, the commercial area being very careful with the need
to delegate the sector to a highly competent, trained and experienced team.
Investment in real estate projects, such as this case study, shows, through data and indicators, an
activity with high profitability. The option to invest in the construction / development of real estate
surpasses even the alternatives of investment with high risks, as it is the case of the investment in
stock market, as the presented previously that had maximum degree of risk.

5. REFERENCES
AMORIM, Daniela. Custos e estoques em alta derrubam rentabilidade da Construção civil.
Jornal Estado de São Paulo, São Paulo, Janeiro, 2015. Available on:
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rentabilidade-da-construcao-civil-imp-,1626364>. Accessed: 6 de out. 2016.

BANCO CENTRAL. Remuneração dos Depósitos de Poupança. Available on:

<http://www4.bcb.gov.br/pec/poupanca/poupanca.asp>. Accessed: 28 de abril de 2017.

BANCO DO BRASIL, Informativo mensal: BB AÇÕES IBOVESPA INDEXADO. Available

on: <http://www.bb.com.br/docs/pub/siteEsp/dtvm/dwn/inf73899759.pdf>. Accessed: 2 de maio
de 2017.

CASAROTTO FILHO, Nelson; KOPITTKE, Bruno Hartmut. Análise de investimentos:

matemática financeira, engenharia econômica, tomada de decisão, estratégia empresarial. 11. ed.
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CETIP, Pagina Inicial. Available on: <https://www.cetip.com.br/>. Accessed: 28 de abril de

2017.

SCHORR, Matheus. Viabilidade Econômica de Empreendimentos Imobiliários. Centro

Universitário Univates. Thesis. Lajeado, Brazil: 2015.

TREVISAN, Ricardo. Estudo de viabilidade econômica de empreendimentos imobiliários. São

Paulo: Trevisan, 2015.