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Property Investment Analysis Practice You are a property analyst. Your client has identified an income producing property in the Perth Metropolitan South Eastern Industrial precinct and would like to consult you on the viability of the investment. Below are details of the subject property: Investmen...

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Pr oper t yI nv es t mentAnal y s i s

Pr ac t i c e

Youar eapr oper t yanal yst .Yourcl i enthasi dent i fiedani ncomepr oduci ngpr oper t yi n t hePer t hMet r opol i t anSout hEast er nI ndust r i al pr eci nctandwoul dl i ket oconsul ty ou ont hevi abi l i t yoft hei nvest ment .Bel owar edet ai l soft hesubj ectpr oper t y :

Investment Variables Purchase Price (Value) Net Lettable Area Acquisition Cost (fees & duties) Potential Gross Income per m2 Vac & Bad Debt (% of PGI) Operating Expense per m2 Loan to Value Ratio Investment Loan pa (Assume Fully Amortising) Loan Term Compounding Depreciation (pa) Investor's Marginal Tax Rate (pa) Growth in PGI (pa) Growth in OPEX (pa) Expected After Tax Net Realisation Value at End of Year 5

$ 7,000,000 4500m2 $ 415,000 $ 150 8.00% $ 25 60.00% 7.80% 20 12 $ 156,000 45.00% 4.50% 3.50% $ 4,200,000

1. Thecl i entchoosest ot ak eanexpect edr at eofr et ur nonequi t yof12. 00%pa. Compl et et heMul t iYearOper at i ngSt at ementandNetCashFl owont henextpage t of or mul at eyourNPVandI RRU .seapenci l f ort hi squest i ononl y.

2. Onceyouhav ecompl et edt hecal cul at i onsi nQuest i on1,pr ovi deananal y si son t hepr oposedpur chaseoft hepr oper t ybasedont hecal cul at i onsyouhav e obt ai nedf r om y ouranswer s .Thenpr ovi deatl east2r ecommendat i onst ot he pur chasert omaxi mi sepr ofit abi l i t yi nt hi sacqui si t i on.Youcangi v e r ecommendat i onsbasedonPr ePur chaseandPost Pur chasedeci si ons .

Answer :

NPV:$476, 057( +1)

I RR:8. 28%

Year PGI VAC EGI OE NOI Tax Route NOI Interest on Debt Depreciation Taxable Income Taxes Cash Flow Route NOI DS BTCF Taxes ATCF Equity (Acq & Disp) Net Cash Flow NPV =

0

1

2

IRR =

3

4

5...