Purpose:The background to this study is an upcoming sale of a property. Owner of the property is currently city of Gävle and tenant is Jan Ekroth who runs the hostel Gamla Gefle in the buildings belonging to the property. The purpose of this study is to investigate whether Gamla Gefle AB has the financial ability to acquire the property and if it can be defended in a commercial plane.Method:In this study a qualitative method has been used, in which empirical data has been gathered from interviews and financial data taken from annual reports. These empirical data have been put against our theoretical framework and led to our analysis. In the analysis, cash flows and discounted future values have been calculated to determine the outcome of the investment.Results & conclusion:The study reaches the conclusion that the hostel Gamla Gefle should complete its acquisition of the property, in spite of an decrease of the annual cash flow. The investment could also lead to new possibilities of business development. Uncertainties’ surrounding the outcome is connected to the fact that the analysis is based upon assumptions of the market development both in real estate as well as in the hostel sector.

Further research:

The study’s purpose has been to see how a specific investment may affect the financial situation of the hostel, in which the investment option has been a property. Suggestions for further research would be to explore opportunities for improvement of the daily operation of Gamla Gefle AB. And if there is other appropriate investment options alongside with the property.

Contributions:

The study shows how a real estate investment model can be used on a real example, and gives a concrete example of how to apply theoretical knowledge to real cases. This study can also be used by Gamla Gefle AB as part of their decision-making, regarding real estate investments.

Keywords:

Real estate investments, cash flow, present value, hostels, tourism, financing.