Discovering Opportunities in Property - Case Study Example

UNIVERSITY OF SOUTH AUSTRALIA Assignment Cover Sheet Please check your Course Information Booklet for submission details including due date and extension allowances. . ADDRESS DETAILS (Externals must provide this for return of assignments - optional for internals) Full name: Address: Postcode: This assignment needs to be submitted through the online grade book system in learnonline. Student ID                 Email: Course code and title: BUSS 1055 Discovering Opportunities in Property School: Commerce Program Code: Course Coordinator: Peter Rossini Assignment number: Project “Further Information: (e.g. state if extension was granted and attach evidence of approval, Revised Submission Date)”   “I declare that the work contained in this assignment is my own, except where acknowledgement of sources is made.” “I authorise the University to test any work submitted by me, using text comparison software, for instances of plagiarism.” “I understand this will involve the University or its contractor copying my work and storing it on a database to be used in future to test work submitted by others.” “I understand that I can obtain further information on this matter athttp://www.unisanet.unisa.edu.au/learningconnection/student/studying/integrity.asp” “Note: The attachment of this statement on any electronically submitted assignments will be deemed to have the same authority as a signed statement.” Signed: Date: UniSA Property Plus Property Report Student Name Property Description PROPERTY ADDRESS: Legal Description Title Reference: 10877022 Plan – Lot Reference: Nil. Proprietor/s in Fee Simple: Proprietor is the administrator of the property and thus transfer is easier. Encumbrances: This property does not have any encumbrances. It can be transferred to another party. Zoning Instrument: Zoning maps and ordinance. Current Zoning: Use of signs and markers can easily be used while providing maps or brochures to the property. Heritage Status: This property was built by the owner and therefore, does not have any heritage status. The heirs of the owner may inherit this property in future. Location-neighbourhood description Distance to (nearest in kms) City: 0.3 M Shops: 0.1 P School: 0.2 P Transport: Walking distance General Topography (describe): The area covers 2559 acres where 2.3% is filled with water. Thames is the main river passing through this region with Victoria bridge passing through it. The town has both old and new phase where Thames street is the oldest. Houses are made of red brick and roofs made of tiles. Castle hill, which lies on the other side High street, makes the place beautiful. In the south, we have the King’s Head museum built in the 17th century. A large public recreation area neighbours the Home park separated by a road and is open to public use. Home Park has an area of 400 acres stretching 3 miles and filled with oaks. In the parks royal gardens, Prince’s show and model farms are present. Large numbers of birds are present. Many of features show that the place was occupied by ancient royal families (Betts & Ely 2008) Key Socio-economic indicators (describe): Differences exist between this area and rural areas. Food produced in rural homes is much more than this area. However, there are community gardens that produce food making the community to extend self-reliance. Majority of the people here are self-sufficient and have restricted movements because they own the land. Permaculture is critical for food production in this area, which if well utilized can be sustainable. There is evenness in terms of lifestyle of the people around this area, but differences exist with other parts of the city. Some of buildings have been continuously maintained, but most of them have the old face (Betts & Ely 2008). Streetscape (describe): Most of these streets are ancient street, which were constructed between 16th and 19th century. There are new phases of the place, which comprise the new Windsor. The property is in Muster street, which joins Howard street (Betts & Ely 2008). Adjoining/Surrounding Land-uses (describe): Most of the land in this area is used for residential purposes. There also commercial houses mostly in basements as well as Hotels such as the White Hart Hotel. Parks, recreational arrears and churches are common in this neighbourhood. Relative property marketability (describe): The property is easily marketable because it has all the legal requirements. Land description Site Area (Sqm): 365 Topography/Accessibility Well accessed because of the well-maintained roads and bridged. The area is also located in open and non-congested street. Orientation/Aspect: The place open to the sun and outer environment with save relaxing cites. It is also found on flat land that can be developed to accommodate recreational areas such as swimming pool. Allotment Type/Shape: The property has a regular allotment/shape View/Outlook (describe): It is made of blocks and colligated and galvanized iron sheets. It is further plastered from the outside which enhances is beauty. Mains Services: Water Available Sewer Effective Electricity Yes Gas  Present HS Broadband Available Main Building description # Main Rooms 1 # Bedrooms 3 good sized bedroom # Bathrooms 3 of them # Undercover car parks NIL Built About # Living rooms 1 Dining room 1 Enclosed Building Area Well enclose Attach/Storeys No attached storeys Style Row cottage Main Outer Wall Plastered wall Main Internal Lining Plastered well finished walls. Roof Cladding No- easily accessed Window Frames: Metallic frames Internal Condition It is attractive and pleasing with clean colour that is not extremely reflecting. It is smooth refurbished and well maintained. Kitchen and living area are spacious. External Condition: Well-maintained, free of cracks and other defects. Appealing and likable. Renovation/Repairs (describe) No repair made since it is new and in good condition. Features (describe) Ten feet ceiling in the living area and nine feet in the bedroom with neutral decorations and effective air conditioner. Has one car park with opening automatic and face the main home. It is a lease property with a rate of 335 US. Dollars a week. Site Features Features (describe) The area has a 365 (sqm) which are all in useful. There are no flooding sites as the land is flat. The neighbourhood is also good and strategic. It is as well spacious allowing for expansion and additional uses. Garden (describe) Has a garden with planted flowers, which are colourful and attractive. Images of Property Streetscape Site Exterior Interior Marketing Opportunity Appraisal of Subject Property The price of the house will be $500,000. The neighbouring houses at a distance of about half a mile were selling between 450,000 and 480,000 US, Dollars in the past five month. There are also no physical barriers inthis property that were on sale and the property of choice. The properties, which have been sold, were constructed at almost the same time as this property. Though the quality of the material used to construct the property of my choice was of higher quality, the sold plots were highly maintained and decorated. The area also shares the same amenities and topographical features. The cost is realistic to the potential buyers and will enable its replacement in another area prime area. Various auctioneers contacted also give almost similar estimates. This can be reliable since they hope that listing will be done through them. With knowledge gathered from various sources, including online makes this figure reliable. Additional information gathered from other sources concerning the property yet to be sold has impact on the proposed price. The prices of other properties are extremely high yet they are almost a mile away from the property on sale. Time has also elapsed since the comparison was based on the price of properties five month ago. The area is also significantly located and completion is high thereby leading to rise in price of all properties including land. Some of information was unavailable at the time of fixing the suggested prices, which include proposed administrative of offices, which are to be constructed in the area. Auctioneer of choice with vast experience in selling properties in this area has leaked information on condition of properties yet to be sold. These properties with high prices have lower qualities as compared to this property (Rossini et al. 2005). Method of sale The best method of selling will be through auction. With this method, it is possible to get the highest price for the property. This is because the prices are suggested as auctioneer announces bids (Rossini et al. 2005). Auctions are well known and are most likely going to attract high prices of the property on sale. There is a guarantee that the moment the high prices are suggested and the hammer falls, the process become legalised and the contract become binding. The person who is purchasing the property will pay 10% of the price immediately, then the balance in less than 20 days. There are no chances of the seller withdrawing at any point during selling and buying. This is because the law supports the process. The property is unique and found in prime neighbourhood, which calls for a formal way of disposing the property. Auction is a fast way of selling a property and does not require complex details. This enables me to dispose the property fast without much struggle. When selling through auction, one also meets with large number of people willing to buy the property thereby making the process easier. There is also a possibility of choosing any auctioneer; yet, if the property does not reach the minimum price set it may not sell (Rossini et al. 2005). The best agency would be the open agency referred to as general agency (Roland 2009). With this agency type, rights of marketing the property shall be given to all, which will encourage competition hence high prices. The process will also be fast and reliable. Marketing and Advertising First is to understand the objective of disposing the property and purpose, which the fund will fulfil. Analysis of the details of property and is status, which include possible competitors and related external forces. Consideration of political, social and all regal procedures, which should be put in place. Possible challenges that can be faced while disposing the property will be considered to allow enough preparation. Analysis of potential buyers as well as selected auctioneer capabilities and reliability respectively is paramount. Alternative marketing strategy that may be adopted and views from other auctioneers to ensure that the best outcome is achieved (Rossini et al. 2005). Strength, weaknesses and opportunities are also considered. Budget, which involves cost of advertising, auctioning and other expenses, is also crucial. Domain .com will be the most preferred advertising agent because it is popular throughout the country. The cost will be $500 for the advert. Investment Opportunity Income potential The property is in good condition and its registration documents are varied. The title deed is varied and it indicates the real owner. The property is also constructed in a fully approved place and meets all the construction requirements. The property is also well maintained, attractive and in good neighbourhood. The validity and compliance with all the requirements of the law makes the property easily administered. The property is a great investment with potential of generating much income to the owner. However, this will depend on the good relationship created between the owner and the one leasing the property. The owner should ensure the property is in good condition whereas the tenant should ensure he takes care of it (Roland 2009). Healthy relationship between these two parties makes this property a guarantee source of income and therefore, a reliable opportunity. This can determine the period the opportunity last. The relationship can also determine the risk involved in this. To ensure this, the proprietor needs to ensure the tenant has a reliable source of income. Reliable legal registration also makes it easier to conduct other processes such as rental increase, easier handover when a tenant is leaving and choice of lease period (Roland 2009). Gross rent of the property --------------($365* 12)---$4380 Value of a property is ---------------------$550000 Yield of property ---------------------------0.08 Gross income multiplier = current value/gross income =$550000/$4380 122 Development Opportunity Development Opportunity The land covered by this property is 365 (sqm). This land is therefore very small for potential development such as other residential houses, stores and other facilities. The area is also found in urban areas where much of expansion is not possible. Although permaculture may be practised in these regions and other neighbourhood, this property will be limited by space. However, the property is located in neighbourhood where recreation is valued. The neighbouring home park and museum are important recreational resources. Table tennis facilities and other games, which may require less space, can be constructed. These will add the value of the facility and eventually rent will be increased. The property is on a flat land, which places it at an advantage because swimming pool can be constructed within the facility. Swimming pool will not only add value to the property, but also make it competitive during disposal. The tenant may renew his period when the contract has expired. Plenty of water as well as topographical advantage can allow the construction of a fishpond. The pond can be a source of food and income for tenants as well as a recreational centre (Miles et al. 2007). The area is also city centre, which places it at a strategic position. It is just less than an hour walk to town. It is therefore economical to live in this property while working in town. Transportation cost can be saved or used for other productive opportunities. Its proximity to town makes the facility’s value to appreciate constantly. In future, it may be an opportunity to earn more from rent or sale. The town is also expanding outward and thus the place may be very strategically place in future (Miles et al. 2007). Detailed Feasibility OR Investment Analysis Feasibility The property has a number of development opportunities as identified above. It is therefore important to retain the property. A proposed residential property with 3 bedrooms Land price(purchase price) and other consociate cost $550,000 Weekly rent $365 Marked gross income multiplier 24 Building are 100 square metres per unit Construction cost per square metres $1000 Cost of preparing the site landscape fee and fencing $35,000 Application an consulting fee $30,000 Agency fee and cost of marketing 2% of selling price Working Gross annual rent ---(365*52)----------------------------------$10,980 Gross annual income multiplier -------------------------------$80 Selling price---------------------------------------------------------$878,400 Potential selling price --------------------------------------------$800,000 Total development value----------------------------------------------------------------800,000 Cost Acquisition cost + land cost--------------------$550,000 Construction cost—(100*1000)---------------$100,000 Connection fencing and cite preparation----$35,000 Application fee and consulting fee------------$30,000 Commission and marketing cost--------------- $5,270 Total development cost------------------------------------------------------------------$720270 Profit is $79730(800-720270) Return on investment-------------11.07% This development proposal can be pursued further because the sum of development value is high than the cost of development (Crook 2006). Bibliography Betts, RM & Ely, SJ 2008, Basic Real Estate Appraisal: Principles and Procedures, Thomson South-Western publishers, USA. Crook, D 2006, The Wall Street Journal: Complete real-estate investing guidebook, Dow Jones & Company, New York. Miles, M. E. Berens, G. Eppli, MJ & Weiss, MA 2007, Real estate development: principles and process, 4th ed., The Urban Land Institute, Washington DC. Roland, P 2009, Australian Property Investment and Financing, Thomson Reuters Sydney, Australia. Rossini, P. Kershaw, P. Marano, W & Kupke, V 2005," Evaluating returns in the residential rental sector", Property Management, vol. 23, no. 4, pp. 286-300 Read More