Discovering Opportunities in Property Project - 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 at http://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: 11086767 Plan – Lot Reference: Luxury apartment Proprietor/s in Fee Simple: Fee simple absolute or freehold of the real estate the owner has complete ownership of this property. Encumbrances: The property can be easily transferred because it lacks any encumbrances Zoning Instrument: Zoning maps, zoning ordinance and zoning variance are available and well used in this property’s legal documents. Current Zoning: The current zoning is more detailed. It is more concerned with the designs, aesthetic and social impact in new developments Heritage Status: The owner acquired it through buying; his heirs through a written will can inherit the property. Location-neighbourhood description Distance to (nearest in kms) City: 0 M Shops: 0.1 P School: 0.5 P Transport: 0 General Topography (describe): The property is located in Wakefield street in the heart of the Adelaide city, which is in southern side of Australia. The city is 170 feet above sea level and lay on a plateau. Streets are wide, clean and secure to accommodate both city dwellers and frequently incoming visitors. Variety of open beautiful spaces and recreational ground are present, which makes the city a unique place to live in. Waters stretch to the main land coupled by firm bridges. Along the edges of these waters are beautiful trees, which attract large numbers of people to enjoy life performances by musicians. One side of these waters have developed into a forest making the city to have some characteristics of a natural environment. In the middle of this forest are open places, which have been developed into recreational cites (Forlee 2012). This attracts many visitors. Hills are situated in the eastern side of the city making the city enjoy cool environment, but freely open to sunrays. Wakefield street has trees giving the locality beautiful and fresh air. Botanical and zoological gardens are also common. Key Socio-economic indicators (describe): The surrounding has people with similar lifestyles and same economic status. Buildings range from old well-maintained structures to modern buildings. Art Galleries, public libraries and museums equipped and rich in valuable collections provide employment to the local people and beyond. The city is a destination for tourist from all over the world because of its strategic position and uniqueness. The property is found few minutes’ walk from Foundling Museum rich in art and a major tourist destination. Schools and churches are in the neighbourhood right across the street thus easily accessible. Banks and other administrative offices are available and close to each other. According to Roland (2009), these amenities are important sources of employment and society welfare thus playing a greater role to improve the lives of the people. Retail and wholesale business makes the city busy and create employment. Streetscape (describe): The street is strategically located in the heart of the city with mixture of old and new building. Its proximity to major buildings makes its most one of the most preferred. Renoir cinema is 3 minutes’ walk; Fair way Hotel is 5 minutes, Horse hospital in 5 minutes’ walk, School of life is 3 minutes while British library is 7 minutes’ walk. The street is known for beauty and cool environment provided by well-planted trees. Adjoining/Surrounding Land-uses (describe): The entire land is found within prime urban area and thus buildings cover most of land. There are also lands covered by recreational grounds. The northern side is forested area with big trees and natural herbs. This place has little interference by human activities. Relative property marketability (describe): The property is relatively marketable because it has all required documents as per the law. The property is also strategically placed and found on a high valuable land, which will attract large numbers of possible buyers. It is also close to relevant amenities. Transpositional cost is not incurred. Land description Site Area (Sqm): 201 (sqm) Topography/Accessibility The property is easily accessible because it is on a well flat land with well-maintained roads joined to other roads. No hills or ditches around the property. It is in the city, which neighbours the sea thereby promoting its accessibility. Orientation/Aspect: The property is in an open place meaning one can easily access the sun. The city is as well open with small hills to the north, but it is open and faces the sun directly. No tall buildings are present in the neighbourhood, which could prevent the sun and the general outer space. Allotment Type/Shape: The allotment shape is regular View/Outlook (describe): The house is made of brocks, which are red in colour. It has glass walls, which makes its smart and have enough light passing through. Some parts of the wall are plastered with white colour matching the surrounding environment. Trees and flowers can be seen from the outside, which are green in colour. Mains Services: Water Yes Sewer Yes Electricity Yes Gas  HS Broadband Nil Main Building description # Main Rooms 3 # Bedrooms 6 # Bathrooms 2 # Undercover car parks 2 Built About 2000 # Living rooms 3 Dining room 1 Enclosed Building Area Fully enclosed Attach/Storeys 2 Style Town house Main Outer Wall Made up of red blocks and some sections are plastered. Glass sections occupy a larger area of the fore part of the building. Main Internal Lining Plastered shinny well finished walls. Roof Cladding Yes –roof is cladding –cannot be accessed from the ground. It is flat. Window Frames: Metallic window flames with sooth finishing and window well fixed. White in colour, which is not shinny. Internal Condition Wooden floor, brown in colour. Wooden stairs without steep elevation. Modern furniture and fixtures’. White walls which are plastered and reflect medium lights. External Condition: Well maintained without crack and broken parts. Glass windows well fitted. Green trees and flowers properly maintained and classy. Flat land and good drainage. Renovation/Repairs (describe) No renovation or repairs have been performed because the building is new and was well constructed. Features (describe) Rooms are spacious and beautiful with modern furniture and fixtures. The roof is 6 metres high. The property has 3 double bedrooms, 1 living room and 2 bathrooms. It has completely equipped kitchen. Lease is $791 per quarter, council charges are $1901 per Annam, water bill is $211 Site Features Features (describe) It is found in beautiful streets of Wakefield in Adelaide city. The site is proximate to major parts of the city and amenities. The street is secure and beautiful and only a few minutes’ walk to schools, hotels, churches and other related areas. The land is flat and easily accessed. Garden (describe) The garden is well kept, watered, and spacious. Has many attractive species of trees and flowers in fragmented unique sections. Images of Property Streetscape Site Exterior Interior Marketing Opportunity Appraisal of Subject Property The price of this property is $700,000.The property is at Bartels road, which is 700 metres from Wakefield street, was bought at $610,000. The specification of the property was similar to that of this property, although the Bartels property had 1 parking space. Bartels property was constructed five month earlier, but the maintenance levels is almost similar. Bartels road neighbours Botanical garden to the north and this makes the value of land and other property go up within a very short time. However, this property also neighbours the Veale Garden, which makes it competitive (Ling & Archer 2008). The topographical features between these two places are similar and have almost the same potential of development. The property is highly maintained with ample packing ground spacious rooms and fantastic orientation. This property is priced slightly higher than other properties found at this locality. Consultation with three auctioneers yields a figure, which is slightly higher than these figures. Because the property will be sold through auction, expectations are high that the best price will be fetched (Rosenauer & Mayfield 2007). There is also drastic increase in number of tourist visiting the city. Many of them are interested in visiting the nearest museum, a 3 minutes’ walk from this property. Expectations are that the price will be higher than the proposed figure. Additional information from those selling the property around will automatically affect its price. This is because the city has shown tremendous growth in the past. Reliable sources from government researchers’ show that the trend will be maintained (Ling & Archer 2008) The price of properties is most likely going to increase. There is also competition because the buyers are increasing in number, yet the properties are few. The property is strategically located and therefore, will be affected by change in prices of other properties yet to be sold. Method of sale Auction will be the most preferred method of disposing the property in which case the highest bidder takes the property. The process is fully defined by the law and is practiced within formal settings. This will be very useful to avoid irregularities. Complaints after selling the property will be through the required legal framework (Parker 2011). Auction enables one to meet many interested buyers who are finally distinguished by their willingness and ability. This method is therefore independent and democratic. The method is also fast and will enable seller to acquire the funds needed to purchase two new properties before their prices go up. Including auctioneers will ensure that the whole process is done without much struggle. When the highest bid is agreed, the potential buyer will pay 10% and deposit the balance within 20 days (Jacobus 2006). The potential buyer is unknown and therefore will be guided by the law processes. He or she cannot withdraw any time they feel like, unlike other method of selling (Ling & Archer 2008). With this method, it is most likely that the property will fetch the highest prices possible, yet it will not be sold something less than the proposed price. Selection of auctioneers will be competitive. Therefore, the best auctioneer with vast knowledge of the market and this field in general will be selected. This will enable the property to be sold at the best prices possible. General agency will be the most appropriate agency because all agents will be given rights. The process is likely going to attract much competition, which will lead to high prices. The level of reliability of this method is high. It is also democratic in nature and open to all interested parties. Marketing and Advertising The marketing plan for this property will include various components. The first component will be stating and identifying the main objective of selling the property. This will enable the seller to be prepared with all the requirements as well as being patient enough to fetch the best price for this property. The reason is to enable the seller to buy two properties in the outskirt of the city in newly upcoming place. The second component will involve conducting a market analysis in terms of the current trends and market segmentation (Newell 2010). The prevailing government policies, construction industries and the past records of the market will determine the current trends in the real estate industry. Under market segmentation, homebuyers will be the first priority to consider. This segment requires a good house with all necessities and they are not ready to make any adjustments in the house. Therefore, their decision will be based on the kind of equipment present. Investors can also be considered as buyers because it is situated in good location (Ling & Archer 2008) The third component involves analysing the competitors. In this case, our competitors include Home Providers and Business Partners Investors. They market themselves through newspapers and television. Their strength include being in the market for a long period and therefore they own a big market share. On the other hand, their weakness lies on the site selection. Because this property is located in a very competitive site, it will attract many investors. SWOT analysis is appropriate to determine the strength, weakness, opportunities and threats that this property will face (Jacobus 2006). In the fourth component, marketing strategies including the message, distribution channel and tactical plan are addressed. The message to be delivered to the potential customers must attract the customers’ attention. For this case, the message will be ‘Make yourself comfortable after a long tiresome day.’ Television will be the best channel to advertise this property. In the schedule, the property will be advertised in the suppertime when most people are watching television. The budget will involve all expenses incurred in the advertising campaign, which add up to$ 45,000. Investment Opportunity Income potential The Title Deed of this property is original and therefore valid. The title indicates the owner and has complied with the land act of 1886. Details of location are available as well as easy method of retrieval. The owner is the one selling the property, not inherited individual or any other party. This makes the process of renting easier. There are also no other hindrances such as caveat, which may be challenging to the potential opportunities of this property (English & Moate 2010). The property meets the required standards during construction and obtained full approval by all relevant authorities. The property is in a prime area, which is lucrative and very competitive. This is evidenced now and therefore expectations are very high that the property is noble opportunity. The property location is also giving it competitive advantage. The area and city in general is growing at very fast rate and attracting foreign investors (Ling & Archer 2008). Reliable information shows that the city will be very different from its status. This opportunity needs much care by ensuring it is in a good condition and well maintained. Tenants must also exercise maximum care to avoid wearing and therefore, depreciating. The validity of these expectations will depend on how maintenance and development of the property will be (Jacobus 2006). Effective registration will facilitate realisation of these opportunities that await this property. Gross rent of the property--------------$400*52----------$20800 Property value------------------------------$700,000 Property yield--------------------------------$0.03 Gross income multiplier = current value /gross income =$700,000/20800 =$33.6 Development Opportunity Development Opportunity The land under this property is 201 (sqm); along Wakefield street in the beautiful city of Adelaide. In real measurements, the area seems very small to accommodate other developments. However, the property is situated in an area where simple development will attract many benefits. The ultimate success factor of any property is its ability to change with time and available opportunities. Very old buildings can be modernized and be useful. As well, the size of the property may not be the hindrance to development but nature and the level of innovation will count (Baum & Hartzell 2012). This property is located in prime area where commercial activities are many and very rewarding. The outer space is enormous meaning that one corner can be set aside for small curio shop. The neighbourhood is renowned for recreational activities, which may attract attention of potential tenants. There is need to develop the property by improving aesthetic value to match the environs. Table tennis facilities, pool table and other games, which can utilize small space, can raise the value of the property and attract many tenants. The space left can also be used to construct a swimming pool, which makes the place not only attractive, but can also add the value of the property. The area neighbourhood cannot support permaculture, which is common in other areas of south Australia. However, the place can be developed to contain a small fishpond, which can be useful in many ways. Another way of maximising opportunities will be to improve advertising methods, which will attract more tenants (Baum & Hartzell 2012). All these methods will make the property one of the most preferred. This may lead to increase in the amount of rent and immergence of other avenues of earning income. Detailed Feasibility OR Investment Analysis Investment Value Feasibility Back of the envelop calculation for a proposed property to be rented. The following are information provided for the proposed property with 3 double bedrooms. 1. Land purchase price including other acquisition costs $ 700,000 2. Weekly rental per double bedroom $ 400 3. The market gross annual income multiplier 26 4. Building - 201 square meters per double bedroom 5. Construction cost- 1150 per square meters 6. Site preparation costs, fencing, landscape fee and other expenses $ 45,000 7. Agency and marketing costs – 1% of the selling price 8. Application fee and consultancy fee $ 40,000 Calculations are computed as follow: Income Gross annual (400 x 52)................................................................ $ 20800 Gross annual income multiplier........................................................26 Selling price............................................................................... $ 540800 Potential selling price per double............................................. $ 540000 Total development value for 3 double bedrooms.................................................... $ 1,620,000 Cost Land and acquisition cost....................................................... $ 700,000 Construction cost (3x201x1150)........................................... $ 693,450 Site preparation, fencing and other expenses.......................... $ 40,000 Application and consultancy fee............................................. $ 45,000 Agency and marketing cost....................................................... $ 16,200 Total development cost............................................................................................... $ 1,494,650 Profit is given by 1,620,000-1494650= $125350 Return on investment is given by 125350/ 1,620,000 = 7.73% The total development value of this property is greater than total development costs. This means that the option selected will be viable according to these calculations and therefore it is worth to continue with this proposal. However, more analysis should be done in order to determine whether the proposal is feasible (Galaty, Allaway, & Kyle 2002). This is because the calculations only provide an idea that the investments can give some good returns through renting it. Reference List Baum, A & Hartzell, D 2012, Global property investment: strategies, structures, decisions, Blackwell Publishing Ltd, United Kingdom English, J & Moate, B2010, Discovering new business opportunities, Allen & Unwin, Crows Nest NSW Forlee, R 2012, Australian residential property development: a step-by-step guide, John Wiley & Sons Australia, Ltd Galaty, F., Allaway, W & Kyle, R 2002. Modern real estate practice, Dearborn Real Estate Education, Chicago Jacobus CJ 2006, Real Estate: an Introduction to the Profession, 10th ed, Thompson South-Western, Ohio Ling D C & Archer W R 2008, Real Estate Principles A Value Approach, McGraw-Hill/Irwin New York USA Newell G 2010 ‘The Effectiveness Of A-REIT Futures as a Risk Management Strategy In The Global Financial Crisis’, Pacific Rim Property Research Journal, Vol 16, No 3. Parker D 2011, Global Real Estate Investment Trusts, Wiley-Blackwell, Chichester UK. Rosenauer J & Mayfield J 2007, Effective Real Estate Sales and Marketing, 3rd ed, Thompson South-Western, Ohio. Roland P 2009, Australian Property Investment and Financing, Thomson Reuters Sydney, Australia. Read More