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Group Valuation - Assignment Example

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Summary
Over time now, Pennant Hills demography has changed leading to need for more housing considerations for tenants who wish to rent out rather than an apartment. It is in this view; we have taken an advisory for implementation from the local real estate agency-Pennant Estates…
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Group Valuation Assignment
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Group valuation Assignment Executive summary Over time now, Pennant Hills demography has changed leading to need for more housing considerations fortenants who wish to rent out rather than an apartment. It is in this view; we have taken an advisory for implementation from the local real estate agency-Pennant Estates Ltd-to build a granny flat owing to our small family. The granny flat will be a two bed roomed with a sitting room, a chimney-kitchen, and sizeable partitioned wash rooms given the space for a duo garage won’t accommodate an extension of same. The costs of building comparable with the weekly returns of renting out our current house are welcome (realestate.com.au, 2015).
Costs of construction
The cost of construction is estimated at $69,567.00 with advertisements costs of $3,456 and maintenance costs and utilities will be estimated at $16,874.
With an estimation of $ 89,897.00 as our initial cost, an estimated weekly tune of $1,090 as compared to having the huge lot with garage not maximizing open opportunities. This will include financing of a loan of $80,000.00 from the local bank with an interest rate of 9.8% P.A and own savings of $9,897.00.We shall assume a rate of return of 10% within 3 years for the project. My wife is in agreement with moving out to the granny flat upon finishing so as to rent out the current house of which with a short period, our cost incurrence former could have made a pay back.
Return on Investment
Pennant Hill Family
Initial Cost
USD 89,897.00
USD 89,897.00
USD 89,897.00
Monthly cost
USD 1,092.00
USD 1,120.00
USD 1,230.00
Annual Rate of Return
USD 13,104.00
USD 13,440.00
USD 14,760.00
Bank loan cost
USD 8,809.91
USD 8,809.91
USD 8,809.91
Return on Investment
0.49
0.53
0.68
Percentage
48.74%
52.56%
67.54%
Net Present Value-
t=0,1,2
r=10%
Co=89897.00
Ct1=13,104
Ct2=13,440
Ct3=14,760
=13104/ (1.1)0-89897=-76,793.00
=13440/1.11-89897=-77,678.82
=14760/1.212-89897= -77,698.65
It shows a consistent flow of income to mean the project is viable for implementation.
Risks
We certain to counter possible risks such as lack of quick tenancy, slow county clearance and approvals among others.
Reference
realestate.com.au, (2015). Real Estate & Property For Rent in Pennant Hills, NSW 2120 (Page 1) - realestate.com.au. [online] Available at: http://www.realestate.com.au/rent/in-pennant+hills%2c+nsw+2120/list-1?source=location-search [Accessed 2 May 2015]. Read More
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