COURSE NAME: BACHELORS DEGREE IN REAL ESTATE BUSINESS MANAGEMENT

COURSE UNIT: QUANTITATIVE ECONOMICS

SEMISTER TWO; YEAR ONE

GROUP ONE

STUDENT NAME REGISTRATION NUMBER SIGNATURE

MWEBE EMMANUEL 23/U/12506/PS

NAKALEMBE LEYTON 23/U/13406/PS
BYAKAGABA ISAAC 23/U/07847/PS
ASASIRA GRAHAM 23/U/06539/PS
ABESIRWE
NASSIWA HABIBAH 23/U/15544/PS
NAJUNA CHARLOTE 23/U/13269/PS
KEMIGISHA JANET 23/U/09605/PS
NAMULEME ANGELLA Z 23/U/14820/PS

TUSIMIRE DEBORAH 23/U/18265/PS

SANYA PIUS 23/U/17196/PS

In exploring the intricate landscape of real estate business, one encounters a myriad of challenges in
resource optimization, investment decisions, portfolio management. Within this dynamic industry, the
application of linear programming emerges as a powerful analytical tool, providing a systematic
approach to address complexities and maximize efficiency. As a student of real estate business
management, you are required to use the knowledge acquired in quantitative techniques for problem
solving , among which is linear programming to answer the following questions.

 With relevant examples, explain the rationale of linear programming to real estate manager
and the extent to which its application is limited.
The following are the rationale for linear programming to real estate managers;
 Portfolio management.
By formulating a linear programming model, the managers can determine the optimal
mix of a property investment to maximize the overall return while considering factors
such as risk tolerance, cash flow requirements and market conditions.

 Land management.
Suppose a real estate developer owns a large piece of land and wants to determine
the optimal allocation of land for different land uses such as residential, commercial
and recreational areas. Linear programming can help identify the most profitable
combination of land uses while considering factors like market demand, construction
costs, zoning regulations, and environmental constraints. The model can optimize the
land allocations to maximize the developer’s profits like maximizing green space.

 Rental property management.

A real estate business manager is responsible for a portfolio of rental properties may
need to determine the optimal rental rates for each property to maximize the overall
revenue. By formulating a linear programming model that considers factors such as
property location, size, amenities, market demand, and competition, the manager can
identify the rental rates that will yield the highest total income while accounting for
factors like vacancy rates, operating costs and tenant preferences.

 Facility layout and space allocations.

In case of a property manager responsible for a commercial building, space
optimization can have a significant impact on profitability. Linear programming can be
used to determine the optimal arrangement of tenants, considering factors such as
rental rates, tenant requirements, foot traffic patterns and compatibility between
business. The model can help maximize rental income, minimize vacancy rates and
create an attractive space for tenants and customers.

 Maintenance and repairs

Real estate managers often face budget constraints when planning maintenance and
repair activities for their properties. By formulating a linear programming model, they
 can prioritize maintenance tasks based on factors like urgency of repairs, available
resources and cost- effectiveness. The model can help allocate limited maintenance
budgets optimally, ensuring that critical repairs are addressed promptly while
considering the overall costs and impact on tenant satisfaction.

Despite these potential applications there are also limitations to the use of
linear programming in real estate business management ;

 Complexity and assumptions.

Real estates management involves numerous variables and uncertainties .linear
programming assumes linearity, which may oversimplify the real world complexities
involved in property management. Real estate decisions often require considering
nonlinear relationships, market dynamics and qualitative factors that linear
programming may not fully capture.

 Dynamic and changing nature of real estate.

Real estate markets are dynamic and property values, rental rates and demand can
change over time. Linear programming models are often static and do not easily adopt
to changing conditions. Real estate managers need to consider the time dimension,
market fluctuations, and evolving trends that may not be adequately addressed
through linear programming techniques alone.

 Subjectivity and qualitative factors.

Real estate decisions are not solely driven by qualitative factors. Factors such as
location attractiveness, tenant preferences, market sentiment and legal
considerations play a significant role. Linear programming models may not
incorporate these subject factors effectively.

 Data availability and quality.

Linear programming models require accurate and reliable data to produce meaningful
results. Real estate data can be challenging to obtain, especially for specific variables
such as market demand or tenant preferences. Data quality issues or incomplete
information can affect the accuracy and reliability of linear programming models.

b) Explain one real estate business environmental factor problem which can be solved using
linear programming.
 Optimal allocation of resources for property development projects.
When undertaking a property development , real estate companies often face the
challenge of determining how to allocate limited resources such as funds, labor, and
materials among various projects in order to maximize profitability or achieve other
objectives.
 Linear programming can help address this problem by providing a mathematical
framework for optimizing the allocation of resources, lets say a real estate company
has limited budget for development projects and wants to determine the optimal
allocation of funds between two potential projects . project A and project B. The goal
is to maximize the total expected profit from both projects, subject to budget
constraints.

Using linear programming, the company can formulate an objective function and a set
for constraints. The objective function would represent the total expected profit and
constraints would include the available budget as well as any other limitations such as
labor or material availability.

c) Using relevant hypothetical data,

i) Generate algebraic expressions and equations appropriate to the problem in (b) above
The objective function would be to maximize the total expected profit, which can be
expressed as:
Maximize: profit-A*x + profit-B*y
Subject to the constraints: Budget constraint: x + y <= budget
Non negativity constraint: x >= 0, y >= 0
ii) Find the optimum solution to the problem using the geometric approach.
In the context of resource allocation for property development projects, we can use
geometric approach known as the graphical method to find the optimum solution.
Lets consider the example of allocating funds between two projects, project A and
project B with the goal of maximizing total expected profit, subject to a budget
constraint.
1. CREATE A CORDINATE SYSTEM. Set up a coordinate system with x-axis
representing the funds allocated to project B.
2. PLOT THE FEASIBLE REGION. Determine the feasible region, which is the set of all
feasible combinations of allocations that satisfy the budget constraints and any
other constraints. The region is typically bounded by straight lines and curves.
For example , the budget constraint is x +y = budget on the coordinate system and
shade the region below or this line to represent the feasible region.
3. DEFINE THE OBJECTIVE FUNCTION: Determine the objective function that
represents the total expected profit. In our case, it is profit-A*x + profit-B*y.
4. PLOT THE OBJECTIVE FUNCTION COUNTER LINES: Plot the counter lines of the
objective function on the coordinate system. These lines represent constant levels
of profit. Each counter line corresponds to different profit levels.
5. IDENTIFY THE OPTIMAL SOLUTION: The optimal solution lies at point where the
highest contour line intersects the feasible region boundary. This funds that
maximizes the total expected profit of satisfying the constraints.
Note; graphical method is suitable for problems with a small number of decision
variables and constraints.