200875 Property Finance

200875 Property Finance
Due Date: Monday, 30 September 2019
Weighting: 50%
Assignment Details:
As a property analyst, you are required to carry out an investment analysis report for
your client who has an opportunity to purchase an income-producing property.
You must identify an income-producing property and obtain the information for the
property as follows:
a) Property Data- purchasing costs-legal fees etc.
b) Income Data-vacancy rate, current rent, fixed operating expenses, variable
expenses etc.
There are 5 major parts of this report:
Part 1: Introduction
You should provide the identification of the property. It includes the description
information of the subject property.
Part 2: Property Market
You should give a description/analysis of the property market. This would include items
such as vacancy rates, demand, rental, incentives, investment activity and yields.
Part 3: Mortgage Requirements
You are also required to obtain the information of your client’s mortgage requirements.
Identify the amount of loan that is required, term and repayment frequency and interest
rate. Based on the information, calculate the loan repayment.
Part 4: Investment Analysis
By using the collected data, conduct a detailed investment analysis. The analysis should
include:
a) A discounted cash flow,
b) IRR and NPV on property,
c) The impact of debt financing,
d) The optimal financing strategy
Part 5: Conclusion
You should summarise the key findings. Recommendations should also be given.
Assignment Requirements
Although there is no page limit, this assignment should not exceed 2,500 words with
using 12 points font size and 1.5 spacing. Please refer to the suggested format as stated
in the marking guide.
The submission of the hard copy assignment must be accompanied by a signed
assignment cover sheet and the soft copies of all related excel files. However, it is
essential that the body of the report discusses and reports the results of DCFs and does
not simply say ‘refer to information in the excel files’.
For the avoidance of doubt, although referencing and acknowledgements will be
reflected in a marking schedule, failure to reference and acknowledge will lead to
automatic failure of the assignment with a 0 mark. Late submission will be penalized
in accordance with School policy at the rate of 10% of awardable marks per day or part
of day late.

200875 Property Finance – SPRING 2019
Assignment -Guidelines
Part 1: Introduction
Identify an income producing property (i.e. office, retail, industrial etc). The
information could be identified via RPData or the websites of REITs etc.
Part 2: Property Market
Market review; compile different market reports. The reports are available from many
property valuation companies such as Jones Lang LaSalle, Knight Frank. One
example is the report of Sydney CBD Office Market Overview: March 2016 from
Knight Frank.
Part 3: Mortgage Requirements
You are required to discuss the different loan options and give your recommendation
(fixed or variable interest rate; fully amortising or interest-only). You need to
calculate the mortgage repayment as well. See the textbook (chapters 3, 4 and 6) or
powerpoint slides (see Weeks 4-6). Please check with major banks regarding interest
rates, loan options etc.
Part 4: Investment Analysis
a) A discounted cash flow- you need to project a DCF on property (without
financing)- See the powerpoint slides of Weeks 7-8 and the textbook (chapters
9, 11 and 12)
b) Based on the DCF- you should able to calculate the IRR and NPV on property;
discuss the results.
c) The impact of debt financing- project a DCF on Equity before tax; calculate
the NPV and IRR on equity; discussion.
d) The optimal financing strategy- comparing different debt financing strategies
and identify the optimal strategy.
Examples will be given in the lecture and be available online (vUWS).
Part 5: Conclusion
You should summarise the key findings. Recommendations should also be given;
should the property be purchased? How should it be financed?

Bill Carlson

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