regarding clarifying questions at the beginning: these questions have the following objectives:
- Completely understanding the context/situation (including, unclear terminology, but also, for example, the business model of the client if unclear!)
- Understanding the question(s) of the client
- Understanding (and quantifying if applicable) the underlying objective(s) of the client
These questions are aiming at understanding the initial setting, hence forming a precondition to outline your structure towards answering the core question (the issue tree)!
Please note: the clarifying questions are NOT meant to gather information that will be later used in the analysis. This will come across extremely random and arbitrary! Such questions should be a direct consequence of your approach/structure, but not come before.
Regarding the structuring: this is a typical strategic decision - you can easily translate it to a number of different contexts, but the principles upon which you base your approach should always remain the same:
1. Core Question: "Should the client invest into Real Estate?"
2. Identify criterion to make this decision: If income ("value") is the objective (to be verified in clarifying questions), then the additional value we can create over the client's investment horizon has to be significantly higher than the investment cost. Moreover, the risks need to be manageable.
3. Compile base information: Purchasing Price of target real estate / yearly operating cost of these building(s) if purchased / yearly rental income / projected development of selling price in the future / investment horizon of client
4. Deep dive into the value bucket by means of a profitability tree: what are the levers of value here? Compare Scenario A (investing into real estate) to Scenario B (not buying real estate and investing into best alternative) in terms of profit
5. Calculate annual value (delta between Scenario A and B). If investing into real estate indeed gives you higher expected income (both rent and potential increase in future selling price), then divide the purchasing price of the real estate plant by this additional yearly income. This gives you the break even point (point in time after which the investment becomes profitable). If this point comes earlier than the investment horizon, then this is a beneficial investment and the client should proceed with the purchase (purely based on financials).
6. Don't forget to compile potential risks and mention them in your summary