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First of all, usually these models are heavily adapted to a specific country (even for Europe), real estate class (housing, commercial) and market (secondary, primary). In general I would say it's very hard to directly apply standard quantitative tools (like MC) from finance for real estate market. The models I've seen were not heavily quantitative. The ...

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Alex's post hits the main point: leverage amplifies returns (either positive or negative). In this case, it is not interest rate but loan constant that we should be focusing on. For a \$5.68MM loan (80% of \$7.1MM), the loan constant is 7.55%. In excel, I used the function: $$PMT(5.75\%/12,30\times12,5680000)\times12$$ to come up with annual debt service ...

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Quant finance is about finding prices of illiquid assets in terms of more liquid assets. So if you have the the data for liquid small house prices you should be able to come up with a reasonable guess for less liquid larger houses, for example. That's basically what's been done all the time - replication of complicated derivatives wrt more liquid assets. ...

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