Property Portfolio and Finances

Investment Appraisal of Liverpool

Liverpool John Moores

12

Valuation Theory and

Investment Residential and Commercial Property in

Liverpool

392106


Executive Summary

After a full analysis of 10 properties in and around Liverpool only 5 provide a

profit, four of which are worthy in an investment portfolio. The required mortgage to

receive this profit is a 20 year fixed rate mortgage at an interest rate of 3.49% for 2

years and 4.5% thereafter.

Breaking down the properties worthwhile are 4, 8, 9 and 10. Whilst the first

property are residential providing £35846 profit after 20 years the last three are office

providing £235000 profit. Even with risks factored in using the sensitivity test the

profit is still enough to be worthwhile of an investment. Changing different factors

such as the discount rate, the mortgage rate or the rental rate all cause a reduction

however the reduction is not enough to produce a negative cash flow.


Contents

1. Introduction 4

2. Investment 4

2.1 Investment Vehicles 4

2.2 Ratio of Residential and Commercial Assets 5

2.3 Chosen Properties 6

3. Legality 16

4. Real Estate Financing 17

5. Current Market 18

5.1 Inflation 19

5.2 Swot Analysis of Liverpool 21

6. Cash Flow 22

7. Viability 32

7.1 Property Loss/Profit 33

8. Sensitivity Analysis 34

9. Conclusion 35

References 36

Appendix A 37

Appendix B 47


1. Introduction

With the current climate in turmoil the demand for property is low when

compared to that of 2007; because of this the capital value of property has

reduced by 16.76% (Zoopla 2012). With reduced values it has never been a

better time to buy property. Whether it is commercial or residential the capital

value will most likely be back to that of 2007 in 20 years’ time. This report will

outline basic knowledge of investment to enable any reader to understand the

terminology used in the report. Mortgages will be explained along with the right

mortgage type for this situation and an investment appraisal to demonstrate the

profitability of property from a selection of 10 properties with their associated rate

of returns and payback periods if applicable.

2. Investment

With the use of an investment vehicle a return on capital can be achieved. It does

require sacrifices on current spending but it will ensure future gains if proper

research has been carried out. The source of the capital can range from a sale of an

asset to borrowing from financial institutions.

With all equity there is usually some sort of debt, i.e. mortgages. The amount of

debt to the equity can be expressed in a ratio which is commonly known as Gearing.

A highly geared ratio shows a large amount of borrowed capital. A Low ratio should

be aimed for as the vulnerability to an economic downturn will be effectively a lot less.

With the initial deposit for the properties being 40% the gearing ratio of this portfolio

will be 60%.

2.1 Investment vehicles

There are multiple ways to earn a gain on a capital, the broad name for these

methods are investment vehicles, each with its own advantages. Every bank will

offer tax free savings account called ISA’s. All are slightly different but the same

rules apply. There will be a set interest rate which you will earn either monthly or

yearly. They have a set limit which is tax free, anything over this will be taxed. For

2012/2013 the limit is set at £11,280. The advantages to ISA’s are that there are no

risks attached, however the rate of interest you receive will not have the same

monetary value when first opened and the rewards are not as good when compared

to other investment vehicles.

Another investment vehicle is shares. More risky but can be more rewarding at

the end. Once a company is on the stock market a set amount of shares are open to

the market. The value of the shares can increase or decrease depending on internal

and external factors. The amount of shares owned is also equal to the percentage of

ownership in that company and so any profits will be received by the shareholder in


the form of dividends. The shares can also be sold for a profit if sold in an upturn,

however all transactions are liable for tax and transaction costs. The obvious

disadvantage of stocks is that the shareholders can receive a loss as well as a profit,

but the rewards are more than an average ISA.

Moving on to tangible investments, property is a great way to see monetary gain.

Property can be split into three main categories:-

Real estate for holding

Sole purpose will be owner occupation for a duration, the mortgage will be

paid over the time of occupation.

Real estate for selling

The sole purpose will be a future development within the property to add

value which can be released once sold

Real estate for letting

The sole purpose will be buy-to-let, a very common procedure for property

in the U.K. The tenant will pay the mortgage repayments every month.

These three categories can be applied to all types of property whether it is residential,

commercial or industrial. Property is usually a long term investment which can

sometimes be difficult to release the savings because of various factors such as the

current demand, lengthy sale periods or long property chains. Property is also

associated with high transaction costs and stamp duty.

2.2 Ratio of Residential and Commercial Assets

It may be tempting to just buy multiple properties of one type but in doing so

the risk in a property portfolio will drastically increase. In the goal of reducing risk

it would be wise to diversify the portfolio with different types of property. A mixture

of residential and commercial would be best suited. With the average age of new

buyers being 35 as shown in a recent reported (J.Hall 2012) the residential rental

market has been growing since 2007. The residential rental market will

continually grow until mortgages are more accessible, because of this it would be

advised to have over half the properties in residential. Over the10 properties

required, 7 residential and 3 commercial would be the most efficient whilst still

minimising any associated risk.


2.3 Chosen Properties

Property 1 – Residential

Will achieve a rental income of around £850 (Appendix B 1)


Property 2 - Residential



Property 8 - Office

Will achieve a rental income of around £34,745 P.a (Appendix B 8)


Property 9 - Office



Property 10 - Office


All ten properties have been valued using the comparative method (Appendix B

1-10), all evidence used will be provided in website links (Appendix C 1-10).


3. Legality

Ownership of property and the land it lies on is not always as simple as it sounds,

before 1862 title deeds was the proof required to occupy the property and land. After

1862 the Land registry act was brought in. This new system required all land to be

registered showing true ownership, since 1862 the system has improved but it does

still have its flaws. Some properties are still not registered making sale of a property

extremely difficult. The title of the property needs to be investigated at least 15 years

back. Unregistered land is also liable for adverse possession in which the current

occupier will lose the right to that property and land. All 10 properties need to be

investigated to check for registration with the HM Land registry.

A major part of property can be planning permission, and change of use or

developments need to apply for the right to do so, this can be very costly and time

consuming. Fortunately the chosen 10 properties are all ready to rent out to tenants

and require no extra work. Any future plans must be adequately planned however.

Once the properties are ready to let there are some statutory acts and tenancy

agreements that protect both the landlord and tenant which need to be considered.

Firstly when looking for tenants, no discrimination of any type is acceptable.

Since as early as 1975 discrimination has been unacceptable especially within

landlord and tenant relations. Three main acts have been continually updated to

ensure good relations which are statutory. For both residential and commercial

property the three statutorily acts that must be adhered to are:-

Sex Discrimination Act 1975

This act makes it illegal for landlords to discriminate against a tenant

because of gender.

Disability Discrimination Act 1995

This act makes it illegal for landlords to discriminate against a tenant

because of a disability.

Racal Relations Act 1976

This act makes it illegal for landlords to discriminate against a tenant on

racial grounds.

All three acts have been updated and now reside in the Equality Act 2010 but the

same principles apply.

Finally, both residential and commercial work on two different systems of tenancy

agreement. With residential leases there are two main types, assured and assured

shorthold. Both are very similar but with one vital difference. Assured you cannot

regain possession of the property from the tenant unless granted by the courts

however assured shorthold you can regain possession if adequate notice is given 2


months before the end of the lease, this type of lease is normally 6 months in

duration. As the required property portfolio will be held for 20 years it would be

advised to use an assured tenancy to ensure the longevity of the tenant.

As a Landlord to residential tenants certain responsibilities must be upheld as

part of any tenancy agreement. The responsibilities will include:-

Gas Safety

All gas appliances must be installed and maintained by a gas safe

registered engineer

Electrical Safety

The electrical system (including wiring, sockets and lighting) and all

electrical appliances must be at a safe level.

Fire Safety

All fire regulations must be followed including adequate fire escapes, fire

resistant furnishings and fire alarms place around the property.

Repairs

The landlord will be responsible for repairs that include the structure and

exterior, bathroom appliances and fittings, heating and hot water, gas

appliances, pipes flues and ventilation and electrical wiring.

Commercial tenancies work slightly different; working on the Landlord and tenant

Act 1954 the tenant will always have the right to occupy the building. This act was

set to protect the tenant and his business more efficiently however with certain

grounds (section 30 1 a-g of the landlord and tenant act 1954) the court can issue an

order to terminate the tenancy agreement. With a 20 year plan this will not be a

problem unless the tenant causes any problems with covenants or rent payments.

The landlord responsibilities are very different when compared to that of

residential tenancy agreements. All repairs and responsibilities will be stipulated

within the lease.

For both residential and commercial, negations will take place between the

landlord and tenant before the tenancy is signed.

4. Real Estate Financing

Acquiring property without any associated debts is not always an option for

investors, usually because there is too much risk to the investor or the capital is not

available. Finance for property can however be found in a range of different places


but the most common route used is through Banks. Banks offer different mortgages

types, interest rates and Loan terms.

Choosing a mortgage type will greatly depend on the situation. Repayment and

interest only are the two main type’s available. Repayment incorporates interest and

the borrowed capital into the annual repayments; this allows the client peace of mind

that the full mortgage will be repaid at the end of the loan term. Interest only allows

the client to only pay the interest on the loan; however repayment of the capital will

be the client’s responsibility. Any interest on the borrowed finance can be also split

into two main types. Fixed and tracker. Fixed interest is a set percentage for the

whole duration of the loan term whilst tracker changes in line with the Bank of

England. To enable the client to be able to pay back the full amount borrowed

including interest the total loan term can be changed, ranging from 15 years to 30+

years although 25 years is the average for most households.

It would be advised that the best method of finance in this situation would be a

repayment mortgage set on a fixed rate with a loan term of 20 years. Using a

repayment mortgage rather than interest only allows any annual net profits to regain

the personal capital used for the deposit. With the current economic situation the

interest rate on a tracker mortgage will be low however in 7 or more years the bank

of England will increased the interest rate as it will be more than likely that the

economic turmoil will once again return to normal. For a long term plan over 10 years

a fixed rate mortgage will be the best choice for a 20 year plan.

With these choices an estimate of cash outflows and inflows will also be more

accurate during the full 20 years presenting any profits reliably.

As advised, the most applicable mortgage available is from NatWest

(www.Natwest.co.uk), offering 3.49% for 2 years as an introductory rate and then 4.5%

thereafter. A mortgage breakdown (Appendix A, Figure 1- 10) on the ten properties

including annual payments, fees and stamp duty will be included in the report.

5. Current Market Conditions

Currently banks are asking for at least 40% of the value of the property, in doing

so has made buying a property much harder for the average person. With the

accessibility for finance limited, the price of property all over the U.K. has decreased

from that of 2007(Figure 1).


0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

2007 2008 2009 2010 2011 Sep-12 Jun-12

Percentage Change of Average Prices

Avg Price

-2

-1

0

1

2

3

4

5

6

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

Consumer Price Indices and Retail Price Index

CPI

RPI

(Fig.1 Figures from Zoopla, 2012)

Buying property at this point in time will in itself produce a profit in 20 years’ time

if sold but with a rental income the profit will increase. The rental market however is

in a different state, with the average age for a new buyer being over 30 only 1 on 4

currently own their own property, this has had a beneficial impact on the rental

market as it has continually grown and as the BBC stated it is predicated to grow an

extra 4% in 2013 (BBC 2012).

5.1 Inflation

During the 20 year loan term it is

likely that the rent receivable will

fluctuate due to inflation, with rent

reviews within the lease benefits

could be achieved if the rent were

to rise. Looking at the consumer

price indices and the retail price

index (Figure 2) there has been a

constant increase since before

2000, although there were will be upturns and downturns the inflation rate will stay

constant following the trend for the next few years. Applying this trend to a forecast

graph (Figure 3) and using figures from the British chambers

(www.britishchambers.org.uk) the inflation carries on increasing till after 2013 where

it starts to level out, possible due to the economic situation stabilising.

http://www.britishchambers.org.uk/


-15

-10

-5

0

5

10

15

2008 2009 2010 2011 2012 2013 2014

Economic Forecast

GDP

Household Consumption General Government Investment

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

Predicted Rent Change

Predicted Percentage Rent Change

(Figure 3)

From Looking at the graphs a predicated rent change graph has been produce which

can be used to apply to rental income during the cash flow process. The general

estimates have been derived from current inflation rates, expected rises in rental

prices and an assumption that mortgages will be more accessible in 2020 reducing

the growth of the rental market.


5.2 Swot Analysis of Liverpool

Strengths

Five universities in the city centre producing a large need for rented housing.

New developments finished expanding the retail district of Liverpool.

People want to live close to the city centre so tenants for residential properties will never be low.

Most of the properties are new build which come with their own finesse.

Weakness

Large portions of Liverpool outskirts left derelict due to a failed government scheme.

Possible void periods reducing income.

Opportunities

Planned developments on the water front increasing the outlook of properties nearby.

Possible subsides into the sector and the area of Liverpool.

Grade B office space within Liverpool is always need for developing companies.

Threats

The tuition fee increase may reduce the need for student housing.

New government scheme may change rental growth on residential or commercial properties.

During 2018 a new system for energy efficiency will be introduced. Will be problematic for the residential sector.


Property 1

Mortgage Deposit £78,000

Mortgage Repayments £8,475.06

Mortgage Repayments after 2 years £9,200.34

Rent P.a(2013) £10,200.00

Discount Rate 4.50%

Finance Rate 4.50%

Year Cash Out (£) Cash In (£)

Discount

Factor 4.5%

Outflow

Discounted at

4.5% (£)

Inflow Discounted

at 4.5%(£) Net Cash Flow Pv of Net Cash

Discounted

Cumulative

Cash Flow

Predicited

Inflation

(%)

0 -£78,000 -£78,000 -£78,000 -78,000

1 -£8,475 £10,200 0.95694 -£8,110 £9,761 £1,725 £1,651 -76349 0

2 -£8,475 £10,455 0.91573 -£7,761 £9,574 £1,980 £1,813 -74536 2.5

3 -£9,200 £10,506 0.87630 -£8,062 £9,206 £1,306 £1,144 -73392 3

4 -£9,200 £10,557 0.83856 -£7,715 £8,853 £1,357 £1,138 -72254 3.5

5 -£9,200 £10,608 0.80245 -£7,383 £8,512 £1,408 £1,130 -71125 4

6 -£9,200 £10,710 0.76790 -£7,065 £8,224 £1,510 £1,159 -69966 5

7 -£9,200 £10,659 0.73483 -£6,761 £7,833 £1,459 £1,072 -68894 4.5

8 -£9,200 £10,608 0.70319 -£6,470 £7,459 £1,408 £990 -67904 4

9 -£9,200 £10,608 0.67290 -£6,191 £7,138 £1,408 £947 -66957 4

10 -£9,200 £10,598 0.64393 -£5,924 £6,824 £1,397 £900 -66057 3.9

11 -£9,200 £10,588 0.61620 -£5,669 £6,524 £1,387 £855 -65202 3.8

12 -£9,200 £10,598 0.58966 -£5,425 £6,249 £1,397 £824 -64378 3.9

13 -£9,200 £10,608 0.56427 -£5,191 £5,986 £1,408 £794 -63584 4

14 -£9,200 £10,618 0.53997 -£4,968 £5,734 £1,418 £766 -62818 4.1

15 -£9,200 £10,628 0.51672 -£4,754 £5,492 £1,428 £738 -62080 4.2

16 -£9,200 £10,608 0.49447 -£4,549 £5,245 £1,408 £696 -61384 4

17 -£9,200 £10,588 0.47318 -£4,353 £5,010 £1,387 £656 -60728 3.8

18 -£9,200 £10,577 0.45280 -£4,166 £4,789 £1,377 £624 -60104 3.7

19 -£9,200 £10,588 0.43330 -£3,987 £4,588 £1,387 £601 -59503 3.8

20 -£9,200 £10,577 0.41464 -£3,815 £4,386 £1,377 £571 -58932 3.7

Total D Inflow £137,387.17 Total PV Net Cash £19,068

Total D Outflow -£196,319.23

Total -£58,932.06

Profitibility Index 0.24446 Loss

Discounted Pay Back >20 Years No

Net Present Value -£58,932 Loss

IRR -8.16% Loss

MIRR 3% Loss

6. Cash Flow

Property 1


Property 2




Rent P.a(2013) £10,200.00

Discount Rate 4.50%

Finance Rate 4.50%


Discount

Factor 4.5%

Outflow

Discounted at

4.5% (£)

Inflow Discounted


Discounted

Cumulative

Cash Flow

Predicited

Inflation

(%)

0 -£51,980 -£51,980 -£51,980 -51,980

1 -£5,678 £10,200 0.95694 -£5,433 £9,761 £4,522 £4,327 -47653 0

2 -£5,678 £10,455 0.91573 -£5,199 £9,574 £4,777 £4,375 -43278 2.5

3 -£6,163 £10,506 0.87630 -£5,401 £9,206 £4,343 £3,806 -39472 3

4 -£6,163 £10,557 0.83856 -£5,168 £8,853 £4,394 £3,685 -35788 3.5

5 -£6,163 £10,608 0.80245 -£4,946 £8,512 £4,445 £3,567 -32221 4

6 -£6,163 £10,710 0.76790 -£4,733 £8,224 £4,547 £3,492 -28729 5

7 -£6,163 £10,659 0.73483 -£4,529 £7,833 £4,496 £3,304 -25425 4.5

8 -£6,163 £10,608 0.70319 -£4,334 £7,459 £4,445 £3,126 -22300 4

9 -£6,163 £10,608 0.67290 -£4,147 £7,138 £4,445 £2,991 -19309 4

10 -£6,163 £10,598 0.64393 -£3,969 £6,824 £4,435 £2,856 -16453 3.9

11 -£6,163 £10,588 0.61620 -£3,798 £6,524 £4,425 £2,726 -13727 3.8

12 -£6,163 £10,598 0.58966 -£3,634 £6,249 £4,435 £2,615 -11112 3.9

13 -£6,163 £10,608 0.56427 -£3,478 £5,986 £4,445 £2,508 -8603 4

14 -£6,163 £10,618 0.53997 -£3,328 £5,734 £4,455 £2,406 -6198 4.1

15 -£6,163 £10,628 0.51672 -£3,185 £5,492 £4,465 £2,307 -3890 4.2

16 -£6,163 £10,608 0.49447 -£3,047 £5,245 £4,445 £2,198 -1693 4

17 -£6,163 £10,588 0.47318 -£2,916 £5,010 £4,425 £2,094 401 3.8

18 -£6,163 £10,577 0.45280 -£2,791 £4,789 £4,414 £1,999 2400 3.7

19 -£6,163 £10,588 0.43330 -£2,670 £4,588 £4,425 £1,917 4317 3.8

20 -£6,163 £10,577 0.41464 -£2,555 £4,386 £4,414 £1,830 6147 3.7



Total £6,147.44

Profitibility Index 1.11827 Profit

Discounted Pay Back 16.80850048 Within Time

Net Present Value £6,147 Profit

IRR 5.83% Profit

MIRR 4% Profit

Property 2


Property 3




Rent P.a(2013) £9,900.00

Discount Rate 4.50%

Finance Rate 4.50%


Discount

Factor 4.5%

Outflow

Discounted at

4.5% (£)

Inflow Discounted


Discounted

Cumulative

Cash Flow

Predicited

Inflation

(%)

0 -£86,000 -£86,000 -£86,000 -86,000

1 -£9,346 £9,900 0.95694 -£8,944 £9,474 £554 £530 -85470 0

2 -£9,346 £10,148 0.91573 -£8,558 £9,292 £801 £734 -84736 2.5

3 -£10,146 £10,197 0.87630 -£8,891 £8,936 £51 £45 -84691 3

4 -£10,146 £10,247 0.83856 -£8,508 £8,592 £101 £84 -84607 3.5

5 -£10,146 £10,296 0.80245 -£8,142 £8,262 £150 £120 -84486 4

6 -£10,146 £10,395 0.76790 -£7,791 £7,982 £249 £191 -84295 5

7 -£10,146 £10,346 0.73483 -£7,455 £7,602 £200 £147 -84148 4.5

8 -£10,146 £10,296 0.70319 -£7,134 £7,240 £150 £106 -84043 4

9 -£10,146 £10,296 0.67290 -£6,827 £6,928 £150 £101 -83942 4

10 -£10,146 £10,286 0.64393 -£6,533 £6,624 £140 £90 -83851 3.9

11 -£10,146 £10,276 0.61620 -£6,252 £6,332 £130 £80 -83771 3.8

12 -£10,146 £10,286 0.58966 -£5,983 £6,065 £140 £83 -83688 3.9

13 -£10,146 £10,296 0.56427 -£5,725 £5,810 £150 £85 -83604 4

14 -£10,146 £10,306 0.53997 -£5,478 £5,565 £160 £86 -83517 4.1

15 -£10,146 £10,316 0.51672 -£5,243 £5,330 £170 £88 -83429 4.2

16 -£10,146 £10,296 0.49447 -£5,017 £5,091 £150 £74 -83355 4

17 -£10,146 £10,276 0.47318 -£4,801 £4,862 £130 £62 -83293 3.8

18 -£10,146 £10,266 0.45280 -£4,594 £4,649 £120 £55 -83239 3.7

19 -£10,146 £10,276 0.43330 -£4,396 £4,453 £130 £56 -83182 3.8

20 -£10,146 £10,266 0.41464 -£4,207 £4,257 £120 £50 -83133 3.7



Total -£83,132.54




IRR -21.80% Loss

MIRR 3% Loss

Property 3


Property 4




Rent P.a(2013) £5,460.00

Discount Rate 4.50%

Finance Rate 4.50%


Discount

Factor 4.5%

Outflow

Discounted at

4.5% (£)

Inflow Discounted


Discounted

Cumulative

Cash Flow

Predicited

Inflation

(%)

0 -£14,800 -£14,800 -£14,800 -14,800

1 -£1,640 £5,460 0.95694 -£1,569 £5,225 £3,820 £3,655 -11145 0

2 -£1,640 £5,597 0.91573 -£1,502 £5,125 £3,956 £3,623 -7521 2.5

3 -£1,780 £5,624 0.87630 -£1,560 £4,928 £3,843 £3,368 -4154 3

4 -£1,780 £5,651 0.83856 -£1,493 £4,739 £3,871 £3,246 -908 3.5

5 -£1,780 £5,678 0.80245 -£1,429 £4,557 £3,898 £3,128 2220 4

6 -£1,780 £5,733 0.76790 -£1,367 £4,402 £3,953 £3,035 5255 5

7 -£1,780 £5,706 0.73483 -£1,308 £4,193 £3,925 £2,884 8140 4.5

8 -£1,780 £5,678 0.70319 -£1,252 £3,993 £3,898 £2,741 10881 4

9 -£1,780 £5,678 0.67290 -£1,198 £3,821 £3,898 £2,623 13504 4

10 -£1,780 £5,673 0.64393 -£1,146 £3,653 £3,893 £2,507 16010 3.9

11 -£1,780 £5,667 0.61620 -£1,097 £3,492 £3,887 £2,395 18406 3.8

12 -£1,780 £5,673 0.58966 -£1,050 £3,345 £3,893 £2,295 20701 3.9

13 -£1,780 £5,678 0.56427 -£1,005 £3,204 £3,898 £2,200 22900 4

14 -£1,780 £5,684 0.53997 -£961 £3,069 £3,903 £2,108 25008 4.1

15 -£1,780 £5,689 0.51672 -£920 £2,940 £3,909 £2,020 27028 4.2

16 -£1,780 £5,678 0.49447 -£880 £2,808 £3,898 £1,927 28956 4

17 -£1,780 £5,667 0.47318 -£842 £2,682 £3,887 £1,839 30795 3.8

18 -£1,780 £5,662 0.45280 -£806 £2,564 £3,882 £1,758 32552 3.7

19 -£1,780 £5,667 0.43330 -£771 £2,456 £3,887 £1,684 34237 3.8

20 -£1,780 £5,662 0.41464 -£738 £2,348 £3,882 £1,609 35846 3.7



Total £35,846.17




IRR 26.00% Profit

MIRR 6% Profit

Property 4


Property 5




Rent P.a(2013) £11,460.00

Discount Rate 4.50%

Finance Rate 4.50%


Discount

Factor 4.5%

Outflow

Discounted at

4.5% (£)

Inflow Discounted


Discounted

Cumulative

Cash Flow

Predicited

Inflation

(%)

0 -£96,000 -£96,000 -£96,000 -96,000

1 -£10,418 £11,460 0.95694 -£9,969 £10,967 £1,042 £997 -95003 0

2 -£10,418 £11,747 0.91573 -£9,540 £10,757 £1,328 £1,216 -93786 2.5

3 -£11,310 £11,804 0.87630 -£9,911 £10,344 £494 £433 -93353 3

4 -£11,310 £11,861 0.83856 -£9,484 £9,946 £551 £462 -92891 3.5

5 -£11,310 £11,918 0.80245 -£9,075 £9,564 £609 £489 -92403 4

6 -£11,310 £12,033 0.76790 -£8,685 £9,240 £723 £555 -91847 5

7 -£11,310 £11,976 0.73483 -£8,311 £8,800 £666 £489 -91358 4.5

8 -£11,310 £11,918 0.70319 -£7,953 £8,381 £609 £428 -90930 4

9 -£11,310 £11,918 0.67290 -£7,610 £8,020 £609 £410 -90520 4

10 -£11,310 £11,907 0.64393 -£7,283 £7,667 £597 £385 -90135 3.9

11 -£11,310 £11,895 0.61620 -£6,969 £7,330 £586 £361 -89774 3.8

12 -£11,310 £11,907 0.58966 -£6,669 £7,021 £597 £352 -89422 3.9

13 -£11,310 £11,918 0.56427 -£6,382 £6,725 £609 £344 -89079 4

14 -£11,310 £11,930 0.53997 -£6,107 £6,442 £620 £335 -88744 4.1

15 -£11,310 £11,941 0.51672 -£5,844 £6,170 £632 £326 -88417 4.2

16 -£11,310 £11,918 0.49447 -£5,592 £5,893 £609 £301 -88116 4

17 -£11,310 £11,895 0.47318 -£5,351 £5,629 £586 £277 -87839 3.8

18 -£11,310 £11,884 0.45280 -£5,121 £5,381 £574 £260 -87579 3.7

19 -£11,310 £11,895 0.43330 -£4,900 £5,154 £586 £254 -87325 3.8

20 -£11,310 £11,884 0.41464 -£4,689 £4,928 £574 £238 -87087 3.7



Total -£87,086.96




IRR -14.76% Loss

MIRR 3% Loss

Property 5


Property 6




Rent P.a(2013) £11,460.00

Discount Rate 4.50%

Finance Rate 4.50%


Discount

Factor 4.5%

Outflow

Discounted at

4.5% (£)

Inflow Discounted


Discounted

Cumulative

Cash Flow

Predicited

Inflation

(%)

0 -£75,980 -£75,980 -£75,980 -£75,980 -75,980

1 -£8,314 £11,460 0.95694 -£7,956 £10,967 £3,146 £3,011 -72969 0

2 -£8,314 £11,747 0.91573 -£7,613 £10,757 £3,433 £3,143 -69826 2.5

3 -£8,828 £11,804 0.87630 -£7,736 £10,344 £2,976 £2,608 -67218 3

4 -£8,828 £11,861 0.83856 -£7,403 £9,946 £3,033 £2,544 -64675 3.5

5 -£8,828 £11,918 0.80245 -£7,084 £9,564 £3,091 £2,480 -62195 4

6 -£8,828 £12,033 0.76790 -£6,779 £9,240 £3,205 £2,461 -59734 5

7 -£8,828 £11,976 0.73483 -£6,487 £8,800 £3,148 £2,313 -57421 4.5

8 -£8,828 £11,918 0.70319 -£6,208 £8,381 £3,091 £2,173 -55247 4

9 -£8,828 £11,918 0.67290 -£5,940 £8,020 £3,091 £2,080 -53168 4

10 -£8,828 £11,907 0.64393 -£5,685 £7,667 £3,079 £1,983 -51185 3.9

11 -£8,828 £11,895 0.61620 -£5,440 £7,330 £3,068 £1,890 -49295 3.8

12 -£8,828 £11,907 0.58966 -£5,205 £7,021 £3,079 £1,816 -47479 3.9

13 -£8,828 £11,918 0.56427 -£4,981 £6,725 £3,091 £1,744 -45735 4

14 -£8,828 £11,930 0.53997 -£4,767 £6,442 £3,102 £1,675 -44060 4.1

15 -£8,828 £11,941 0.51672 -£4,562 £6,170 £3,113 £1,609 -42452 4.2

16 -£8,828 £11,918 0.49447 -£4,365 £5,893 £3,091 £1,528 -40923 4

17 -£8,828 £11,895 0.47318 -£4,177 £5,629 £3,068 £1,452 -39472 3.8

18 -£8,828 £11,884 0.45280 -£3,997 £5,381 £3,056 £1,384 -38088 3.7

19 -£8,828 £11,895 0.43330 -£3,825 £5,154 £3,068 £1,329 -36759 3.8

20 -£8,828 £11,884 0.41464 -£3,660 £4,928 £3,056 £1,267 -35492 3.7



Total -£35,491.71




IRR -1.86% Loss

MIRR 3% Loss

Property 6


Property 7




Rent P.a(2013) £6,300.00

Discount Rate 4.50%

Finance Rate 4.50%


Discount

Factor 4.5%

Outflow

Discounted at

4.5% (£)

Inflow Discounted


Discounted

Cumulative

Cash Flow

Predicited

Inflation

(%)

0 -£39,980 -£39,980 -£39,980 -39,980

1 -£4,312 £6,300 0.95694 -£4,126 £6,029 £1,988 £1,903 -38077 0

2 -£4,312 £6,458 0.91573 -£3,948 £5,913 £2,146 £1,965 -36112 2.5

3 -£4,681 £6,489 0.87630 -£4,102 £5,686 £1,808 £1,585 -34528 3

4 -£4,681 £6,521 0.83856 -£3,925 £5,468 £1,840 £1,543 -32985 3.5

5 -£4,681 £6,552 0.80245 -£3,756 £5,258 £1,871 £1,502 -31483 4

6 -£4,681 £6,615 0.76790 -£3,594 £5,080 £1,934 £1,485 -29998 5

7 -£4,681 £6,584 0.73483 -£3,439 £4,838 £1,903 £1,398 -28600 4.5

8 -£4,681 £6,552 0.70319 -£3,291 £4,607 £1,871 £1,316 -27284 4

9 -£4,681 £6,552 0.67290 -£3,150 £4,409 £1,871 £1,259 -26025 4

10 -£4,681 £6,546 0.64393 -£3,014 £4,215 £1,865 £1,201 -24824 3.9

11 -£4,681 £6,539 0.61620 -£2,884 £4,030 £1,859 £1,145 -23678 3.8

12 -£4,681 £6,546 0.58966 -£2,760 £3,860 £1,865 £1,100 -22579 3.9

13 -£4,681 £6,552 0.56427 -£2,641 £3,697 £1,871 £1,056 -21523 4

14 -£4,681 £6,558 0.53997 -£2,527 £3,541 £1,878 £1,014 -20509 4.1

15 -£4,681 £6,565 0.51672 -£2,419 £3,392 £1,884 £973 -19535 4.2

16 -£4,681 £6,552 0.49447 -£2,314 £3,240 £1,871 £925 -18610 4

17 -£4,681 £6,539 0.47318 -£2,215 £3,094 £1,859 £880 -17730 3.8

18 -£4,681 £6,533 0.45280 -£2,119 £2,958 £1,852 £839 -16892 3.7

19 -£4,681 £6,539 0.43330 -£2,028 £2,834 £1,859 £805 -16086 3.8

20 -£4,681 £6,533 0.41464 -£1,941 £2,709 £1,852 £768 -15318 3.7



Total -£15,318.21




IRR -0.55% Loss

MIRR 4% Loss

Property 7


Property 8




Rent P.a(2013) £34,745.00

Discount Rate 4.50%

Finance Rate 4.50%


Discount

Factor 4.5%

Outflow

Discounted at

4.5% (£)

Inflow Discounted


Discounted

Cumulative

Cash Flow

Predicited

Inflation

(%)

0 -£130,000 -£130,000 -£130,000 -130,000

1 -£14,527 £34,745 0.95694 -£13,901 £33,249 £20,218 £19,347 -110653 0

2 -£14,527 £35,614 0.91573 -£13,303 £32,612 £21,087 £19,310 -91343 2.5

3 -£15,770 £35,787 0.87630 -£13,819 £31,360 £20,017 £17,541 -73802 3

4 -£15,770 £35,961 0.83856 -£13,224 £30,156 £20,191 £16,931 -56871 3.5

5 -£15,770 £36,135 0.80245 -£12,655 £28,996 £20,365 £16,342 -40529 4

6 -£15,770 £36,482 0.76790 -£12,110 £28,015 £20,712 £15,905 -24624 5

7 -£15,770 £36,309 0.73483 -£11,588 £26,681 £20,538 £15,092 -9532 4.5

8 -£15,770 £36,135 0.70319 -£11,089 £25,409 £20,365 £14,320 4788 4

9 -£15,770 £36,135 0.67290 -£10,612 £24,315 £20,365 £13,703 18492 4

10 -£15,770 £36,100 0.64393 -£10,155 £23,246 £20,330 £13,091 31583 3.9

11 -£15,770 £36,065 0.61620 -£9,718 £22,223 20,295 £12,506 44088 3.8

12 -£15,770 £36,100 0.58966 -£9,299 £21,287 £20,330 £11,988 56076 3.9

13 -£15,770 £36,135 0.56427 -£8,899 £20,390 £20,365 £11,491 67567 4

14 -£15,770 £36,170 0.53997 -£8,515 £19,531 £20,399 £11,015 78583 4.1

15 -£15,770 £36,204 0.51672 -£8,149 £18,707 £20,434 £10,559 89141 4.2

16 -£15,770 £36,135 0.49447 -£7,798 £17,868 £20,365 £10,070 99211 4

17 -£15,770 £36,065 0.47318 -£7,462 £17,065 £20,295 £9,603 108814 3.8

18 -£15,770 £36,031 0.45280 -£7,141 £16,315 £20,260 £9,174 117988 3.7

19 -£15,770 £36,065 0.43330 -£6,833 £15,627 £20,295 £8,794 126782 3.8

20 -£15,770 £36,031 0.41464 -£6,539 £14,940 £20,260 £8,401 135183 3.7



Total £135,182.84




IRR 14.68% Profit

MIRR 5% Profit

Property 8


Propert 9




Rent P.a(2013) £29,430.00

Discount Rate 4.50%

Finance Rate 4.50%


Discount

Factor 4.5%

Outflow

Discounted at

4.5% (£)

Inflow Discounted


Discounted

Cumulative

Cash Flow

Predicited

Inflation

(%)

0 -£130,000 -£130,000 -£130,000 -130,000

1 -£14,527 £29,430 0.95694 -£13,901 £28,163 £14,903 £14,261 -115739 0

2 -£14,527 £30,166 0.91573 -£13,303 £27,624 £15,639 £14,321 -101418 2.5

3 -£15,770 £30,313 0.87630 -£13,819 £26,563 £14,543 £12,744 -88674 3

4 -£15,770 £30,460 0.83856 -£13,224 £25,543 £14,690 £12,318 -76356 3.5

5 -£15,770 £30,607 0.80245 -£12,655 £24,561 £14,837 £11,906 -64450 4

6 -£15,770 £30,902 0.76790 -£12,110 £23,729 £15,131 £11,619 -52830 5

7 -£15,770 £30,754 0.73483 -£11,588 £22,599 £14,984 £11,011 -41820 4.5

8 -£15,770 £30,607 0.70319 -£11,089 £21,523 £14,837 £10,433 -31386 4

9 -£15,770 £30,607 0.67290 -£10,612 £20,596 £14,837 £9,984 -21402 4

10 -£15,770 £30,578 0.64393 -£10,155 £19,690 £14,808 £9,535 -11867 3.9

11 -£15,770 £30,548 0.61620 -£9,718 £18,824 £14,778 £9,106 -2761 3.8

12 -£15,770 £30,578 0.58966 -£9,299 £18,031 £14,808 £8,732 5970 3.9

13 -£15,770 £30,607 0.56427 -£8,899 £17,271 £14,837 £8,372 14343 4

14 -£15,770 £30,637 0.53997 -£8,515 £16,543 £14,866 £8,027 22370 4.1

15 -£15,770 £30,666 0.51672 -£8,149 £15,846 £14,896 £7,697 30067 4.2

16 -£15,770 £30,607 0.49447 -£7,798 £15,134 £14,837 £7,336 37404 4

17 -£15,770 £30,548 0.47318 -£7,462 £14,455 £14,778 £6,993 44396 3.8

18 -£15,770 £30,519 0.45280 -£7,141 £13,819 £14,749 £6,678 51074 3.7

19 -£15,770 £30,548 0.43330 -£6,833 £13,237 £14,778 £6,403 57478 3.8

20 -£15,770 £30,519 0.41464 -£6,539 £12,654 £14,749 £6,115 63593 3.7



Total £63,593.35




IRR 9.65% Profit

MIRR 4% Profit

Property 9


Propert 10




Rent P.a(2013) £25,706.00

Discount Rate 4.50%

Finance Rate 4.50%


Discount

Factor 4.5%

Outflow

Discounted at

4.5% (£)

Inflow Discounted


Discounted

Cumulative

Cash Flow

Predicited

Inflation

(%)

0 -£150,000 -£150,000 -£150,000 -150,000

1 -£16,748 £25,706 0.95694 -£16,027 £24,599 £8,958 £8,572 -141428 0

2 -£16,748 £30,166 0.91573 -£15,337 £27,624 £13,417 £12,287 -129141 2.5

3 -£15,770 £30,313 0.87630 -£13,819 £26,563 £14,543 £12,744 -116398 3

4 -£15,770 £30,460 0.83856 -£13,224 £25,543 £14,690 £12,318 -104079 3.5

5 -£15,770 £30,607 0.80245 -£12,655 £24,561 £14,837 £11,906 -92173 4

6 -£15,770 £30,902 0.76790 -£12,110 £23,729 £15,131 £11,619 -80554 5

7 -£15,770 £30,754 0.73483 -£11,588 £22,599 £14,984 £11,011 -69543 4.5

8 -£15,770 £30,607 0.70319 -£11,089 £21,523 £14,837 £10,433 -59110 4

9 -£15,770 £30,607 0.67290 -£10,612 £20,596 £14,837 £9,984 -49126 4

10 -£15,770 £30,578 0.64393 -£10,155 £19,690 £14,808 £9,535 -39591 3.9

11 -£15,770 £30,548 0.61620 -£9,718 £18,824 £14,778 £9,106 -30485 3.8

12 -£15,770 £30,578 0.58966 -£9,299 £18,031 £14,808 £8,732 -21753 3.9

13 -£15,770 £30,607 0.56427 -£8,899 £17,271 £14,837 £8,372 -13381 4

14 -£15,770 £30,637 0.53997 -£8,515 £16,543 £14,866 £8,027 -5353 4.1

15 -£15,770 £30,666 0.51672 -£8,149 £15,846 £14,896 £7,697 2344 4.2

16 -£15,770 £30,607 0.49447 -£7,798 £15,134 £14,837 £7,336 9680 4

17 -£15,770 £30,548 0.47318 -£7,462 £14,455 £14,778 £6,993 16673 3.8

18 -£15,770 £30,519 0.45280 -£7,141 £13,819 £14,749 £6,678 23351 3.7

19 -£15,770 £30,548 0.43330 -£6,833 £13,237 £14,778 £6,403 29754 3.8

20 -£15,770 £30,519 0.41464 -£6,539 £12,654 £14,749 £6,115 35870 3.7



Total £35,869.88




IRR 7.02% Profit

MIRR 4% Profit

Property 10


7. Viability

When looking at the viability of an investment, certain tools can be used to judge

the return on the investment. Some methods used are better than others but the

most widely used:-

Profitability Index

Discounted Payback Period

Net Present Value

IRR

Profitability index shows the amount received for every £1 invested, for example

£100 investment with £1000 return would equal 10.00. Every £1 makes £10 return.

Formula = Net Cash

Investment

Discounted payback period is another appraisal method used. It shows which year a

return will be received after paying back the initial investment.

Net present value is the most common used out of all methods; it shows the net

profit in current day values.


The final method used within this report is the Internal Rate of Return. This method

shows the true rate of return from a given investment.

7.1 Property Loss/Profit

From looking around the market the ten properties found seemed viable

before any investment appraisal. After the appraisal however only 5 of the properties

are applicable for a return on the investment.

Properties 1, 3, 5, 6 and 7 all received a loss after the 20 years and are not

advisable. Properties 2, 4, 8, 9 and 10 however all received a profit, some more than

others.

Property 2 will receive £1.11 for every £1 invested with a £6,147 profit after the 20

year period. The payback period is 16.8 years with a rate of return set at 5.83%. This

is 1.37% higher than the set discount factor and so would be a wise investment.

Property 4 will receive 26% rate of return which is extremely profitable. Along with a

£35,846 profit the payback period is 4.29 years.

Property 8 will receive a net present value of £135,138 in 20 years’ time with the

initial deposit paid back in 7.67 years. The rate of return worked out at 14.68 with a

profitability index of 2.03.

Property 9 will receive £1.48 for every £1 invested with a £63,593 profit after the 20

year period. The payback period is 11.32 years with a rate of return set at 9.65%.

This is 5.15% higher than the set discount factor and so would be a wise investment.

Property 10 will receive 7.02% rate of return which is extremely profitable. Along

with a £35,870 profit the payback period is 14.7 years.

At the end of the 20 year period all properties will be fully paid off giving the potential

to reinvest that capital into other potential areas.


Property 4




Rent P.a(2013) £5,460.00

Discount Rate 4.50%

Finance Rate 4.50%


Discount

Factor 4.5%

Outflow

Discounted at

4.5% (£)

Inflow Discounted


Discounted

Cumulative

Cash Flow

Predicited

Inflation

(%)

0 -£14,800 -£14,800 -£14,800 -14,800

1 -£1,640 £5,460 0.95694 -£1,569 £5,225 £3,820 £3,655 -11145 0

2 -£1,640 £5,597 0.91573 -£1,502 £5,125 £3,956 £3,623 -7521 2.5

3 -£1,780 £5,624 0.87630 -£1,560 £4,928 £3,843 £3,368 -4154 3

4 -£1,780 £5,651 0.83856 -£1,493 £4,739 £3,871 £3,246 -908 3.5

5 -£1,780 £5,678 0.80245 -£1,429 £4,557 £3,898 £3,128 2220 4

6 -£1,780 £5,733 0.76790 -£1,367 £4,402 £3,953 £3,035 5255 5

7 -£1,780 £5,706 0.73483 -£1,308 £4,193 £3,925 £2,884 8140 4.5

8 -£1,780 £5,678 0.70319 -£1,252 £3,993 £3,898 £2,741 10881 4

9 -£1,780 £5,678 0.67290 -£1,198 £3,821 £3,898 £2,623 13504 4

10 -£1,780 £5,673 0.64393 -£1,146 £3,653 £3,893 £2,507 16010 3.9

11 -£1,780 £5,667 0.61620 -£1,097 £3,492 £3,887 £2,395 18406 3.8

12 -£1,780 £5,673 0.58966 -£1,050 £3,345 £3,893 £2,295 20701 3.9

13 -£1,780 £5,678 0.56427 -£1,005 £3,204 £3,898 £2,200 22900 4

14 -£1,780 £5,684 0.53997 -£961 £3,069 £3,903 £2,108 25008 4.1

15 -£1,780 £5,689 0.51672 -£920 £2,940 £3,909 £2,020 27028 4.2

16 -£1,780 £5,678 0.49447 -£880 £2,808 £3,898 £1,927 28956 4

17 -£1,780 £5,667 0.47318 -£842 £2,682 £3,887 £1,839 30795 3.8

18 -£1,780 £5,662 0.45280 -£806 £2,564 £3,882 £1,758 32552 3.7

19 -£1,780 £5,667 0.43330 -£771 £2,456 £3,887 £1,684 34237 3.8

20 -£1,780 £5,662 0.41464 -£738 £2,348 £3,882 £1,609 35846 3.7



Total £35,846.17




IRR 26.00% Profit

MIRR 6% Profit




IRR 26.00% Profit

MIRR 6% Profit

8. Sensitivity Appraisal

Using Property 4 as a benchmark, the discount rate and mortgage repayments will

change by 1 or 2 percentages to show any weakness for this property.

The discount rate will be increased by 2% to outline possible risks.

Looking at the differences

between the numbers, the risk

has hardly increased. A loss of

£8,000 however the payback

period is still within 4 years.





IRR 25.77% Profit

MIRR 6% Profit

The mortgage repayment will be increased by 2% to outline possible risks.

Once again even with a

payment increase there is

still a profit for the property.

9. Conclusion

Property can be a good investment when properly done however due to the

large outlay the risk is more when compared to stocks and gilts. For a property

investment to be successful a full analysis has to be carried out. This report has

included what mortgage type to use, values of the chosen property and an

investment appraisal using techniques such as Profitability Index, Npv and IRR.

There are so many mortgages available, all with different features which

attract a range of clients. Considering a mortgage lasts anywhere up to 25 years an

appropriate type must be found. 20 years at a fixed rate works out best for a

valuation point however a tracker may present some benefits further down the line.

Property already has its risks so for this situation a fixed mortgage at 3.49% would

be advised.

The result of the investment appraisal shows which of the ten properties will

be viable as an investment and which will provide the most profit. Properties 2, 4, 8,

9 and 10 all provide a profit however some provide a profit too low to prove worthy of

the risk. The second property is only providing a profit of £6,147 which when

compared to the initial capital would not prove worthy. Property 4, 8, 9 and 10

however all provide a profit above £25,000 and would be viable for profit. Whilst all

the positive properties are a good choice, property 8 has a payback period of 4.49

years making it a must in the property portfolio.


Reference

BBC, Rents to rise faster than house prices in 2013 [Online]

Available from: http://www.bbc.co.uk/news/business-20726001

[Accessed: 8th January, 2012]

British Chambers, Economic Forecast

Available from:

http://www.britishchambers.org.uk/assets/downloads/qef_data/BCC_UK_EconomicF

orecast-June_2012-PDF[1].pdf


Telegraph, Average first time buyer is now 35 [Online]

Avaible from: http://www.telegraph.co.uk/news/uknews/9533491/Average-first-time-

buyer-is-now-35-research-finds.html


Zoopla, Current Property Values in Liverpool [Online].

Available from: http://www.zoopla.co.uk/home-values/liverpool/

[Accessed: 13th December, 2012]

http://www.bbc.co.uk/news/business-20726001

http://www.britishchambers.org.uk/assets/downloads/qef_data/BCC_UK_EconomicForecast-June_2012-PDF%5b1%5d.pdf

http://www.britishchambers.org.uk/assets/downloads/qef_data/BCC_UK_EconomicForecast-June_2012-PDF%5b1%5d.pdf

http://www.telegraph.co.uk/news/uknews/9533491/Average-first-time-buyer-is-now-35-research-finds.html

http://www.telegraph.co.uk/news/uknews/9533491/Average-first-time-buyer-is-now-35-research-finds.html


Property 1 £195,000

Property 60% £117,000

Completion Fee £450

Solicitors Fee + disbursement £670

Higher Lending Charge £0

Valuation Fee £350

Land Registry - Voluntary £140

Stamp Duty £1,950

Mortgage Required £120,560

Initial Mortgage Repayment


Initial Duration (Years) 20

Initial Interest Rate 0.0349

Initial Mortgage Repayment Formula

I + SF = I + I * Loan

(1+I)^n -1

(1+I)^n-1 (1+0.0349)^20-1= 0.985947388

I/(1+I)^n -1 0.0349/0.985947388= 0.035397426

I + (I/(1+I)^n -1) 0.0349+0.035397426= 0.070297426

I+I/(1+I)^n-1*Loan 0.070297426*120560= £8,475.06

Initial Mortgage Repayments P.a. £8,475.06

Outstanding

Amount borrowed £120,560

Amount of £1 @ 3.49% for 2 years 1.07101801 A=(1+i)n (1+0.0349)^2

Balance £129,122

Less Payments £8,475.06

Amount of £1 P.a. @ 3.49% for 2 years 2.0349 (1+i)n -1/I (1+0.0349)^2 -1/0.0349

Outstanding £111,876.04

Mortgage Repayment

Mortgage £111,876.04

Duration 18

Interest Rate 0.045

Mortgage Repayments Formula


(1+I)^n -1

(1+I)^n-1 (1+0.045)^18-1= 1.208478766

I/(1+I)^n -1 0.045/1.208478766= 0.037236898

I + (I/(1+I)^n -1) 0.045+0.037236898= 0.082236898

I+I/(1+I)^n-1*Loan 0.125575*111876.04= £9,200.34

Mortgage Repayments P.a £9,200.34

Outstanding



Balance £247,076



Outstanding £0.00

Appendix A

1.



Property 60% £77,970.00

Completion Fee £450.00

Solicitor Fee + Disbursement £600.00

Higher Lending Charge £0.00

Valuation Fee £300.00

Land Registry - Voluntary £140.00

Stamp Duty £1,299.50

Mortgage Required £80,759.50







(1+I)^n -1

(1+I)^n-1 (1+0.0349)^20-1= 0.985947388

I/(1+I)^n -1 0.0349/0.985947388= 0.035397426

I + (I/(1+I)^n -1) 0.0349+0.035397426= 0.070297426

I+I/(1+I)^n-1*Loan 0.070297426*80760= £5,677.18


Outstanding



Balance £86,495




Mortgage Repayment


Duration 18

Interest Rate 0.045



(1+I)^n -1

(1+I)^n-1 (1+0.045)^18-1= 1.208478766

I/(1+I)^n -1 0.045/1.208478766= 0.037236898

I + (I/(1+I)^n -1) 0.045+0.037236898= 0.082236898

I+I/(1+I)^n-1*Loan 0.125575*74942.38= £6,163.03


Outstanding



Balance £165,509



Outstanding £0.00

2.



Property 60% £129,000


Solicitor Fee + Disbursement £750


Valuation Fee £400


Stamp Duty £2,150



Mortgage (60%) £132,950





(1+I)^n -1

(1+I)^n-1 (1+0.0349)^20-1= 0.985947388

I/(1+I)^n -1 0.0349/0.985947388= 0.035397426

I + (I/(1+I)^n -1) 0.0349+0.035397426= 0.070297426

I+I/(1+I)^n-1*Loan 0.070297426*132950= £9,346.04


Outstanding



Balance £142,392




Mortgage Repayment


Duration 18

Interest Rate 0.045



(1+I)^n -1

(1+I)^n-1 (1+0.045)^18-1= 1.208478766

I/(1+I)^n -1 0.045/1.208478766= 0.037236898

I + (I/(1+I)^n -1) 0.045+0.037236898= 0.082236898

I+I/(1+I)^n-1*Loan 0.125575*123373.58= £10,145.86


Outstanding



Balance £272,468



Outstanding £0.00

3.


Property 4 £37,000

Property 60% £22,200


Solicitor Fee + Disbursement £400


Valuation Fee £250


Stamp Duty £0



Mortgage (60%) £23,330





(1+I)^n -1

(1+I)^n-1 (1+0.0349)^20-1= 0.985947388

I/(1+I)^n -1 0.0349/0.985947388= 0.035397426

I + (I/(1+I)^n -1) 0.0349+0.035397426= 0.070297426

I+I/(1+I)^n-1*Loan 0.070297426*23330= £1,640.04


Outstanding



Balance £24,987


Amount of £1 P.a. @ 3.49% for 2 years 2.0349 (1+i)n -1/I (1+0.0349)2 -1/0.0349


Mortgage Repayment


Duration 18

Interest Rate 0.045



(1+I)^n -1

(1+I)^n-1 (1+0.045)^18-1= 1.208478766

I/(1+I)^n -1 0.045/1.208478766= 0.037236898

I + (I/(1+I)^n -1) 0.045+0.037236898= 0.082236898

I+I/(1+I)^n-1*Loan 0.125575*21649.53= £1,780.39


Outstanding



Balance £47,813



Outstanding £0.00

4.



Property 60% £144,000


Solicitors Fee + Disbursement £750


Valuation Fee £400


Stamp Duty £2,400



Mortgage (60%) £148,200





(1+I)^n -1

(1+I)^n-1 (1+0.0349)^20-1= 0.985947388

I/(1+I)^n -1 0.0349/0.985947388= 0.035397426

I + (I/(1+I)^n -1) 0.0349+0.035397426= 0.070297426

I+I/(1+I)^n-1*Loan 0.070297426*148200= £10,418.08


Outstanding



Balance £158,725


Amount of £1 P.a. @ 3.49% for 2 years 2.0349 (1+i)n -1/I (1+0.0349)^2 - 1/0.0349


Mortgage Repayment


Duration 18

Interest Rate 0.045



(1+I)^n -1

(1+I)^n-1 (1+0.045)^18-1= 1.208478766

I/(1+I)^n -1 0.045/1.208478766= 0.037236898

I + (I/(1+I)^n -1) 0.045+0.037236898= 0.082236898

I+I/(1+I)^n-1*Loan 0.125575*137525.12= £11,309.64


Outstanding


Amount of £1 @ 4.5% for 18 years 2.208478766 A=(1+i)n (1+0.045)18

Balance £303,721



Outstanding £0.00

5.



Property 60% £112,170

Completetion Fee £450

Solicters Fee + Disbursement £670


Valuation Fee £350


Stamp Duty £1,900


Inital Mortgage Repayment

Mortgage (60%) £115,680

Inital Duration (Years) 20

Inital Interest Rate 0.0349

Inital Mortgage Repayment Formula


(1+I)^n -1

(1+I)^n-1 (1+0.0349)^20-1= 0.985947388

I/(1+I)^n -1 0.0349/0.985947388= 0.035397426

I + (I/(1+I)^n -1) 0.0349+0.035397426= 0.070297426

I+I/(1+I)^n-1*Loan 0.070297426*115680= £8,131.97

Inital Mortgage Repayments P.a. £8,131.97

Outstanding



Balance £123,895


Amout of £1 P.a. @ 3.49% for 2 years 2.0349 (1+i)n -1/I (1+0.0349)^2/0.0349


Mortgage Repayment


Duration 18

Interest Rate 0.045



(1+I)^n -1

(1+I)^n-1 (1+0.045)^18-1= 1.208478766

I/(1+I)^n -1 0.045/1.208478766= 0.037236898

I + (I/(1+I)^n -1) 0.045+0.037236898= 0.082236898

I+I/(1+I)^n-1*Loan 0.125575*107347.08= £8,827.89


Outstanding



Balance £237,074


Amout of £1 P.a. @ 4.5% for 18 years 26.8550837 (1+i)n -1/I (1+0.045)^18 -1/0.045

Outstanding £0.00

6.


Property 7 £99,950

Property 60% £59,970




Valuation Fee £275


Stamp Duty £0



Mortgage (60%) £61,335





(1+I)^n -1

(1+I)^n-1 (1+0.0349)^20-1= 0.985947388

I/(1+I)^n -1 0.0349/0.985947388= 0.035397426

I + (I/(1+I)^n -1) 0.0349+0.035397426= 0.070297426

I+I/(1+I)^n-1*Loan 0.070297426*61335= £4,311.69


Outstanding



Balance £65,691


Amount of £1 P.a. @ 3.49% for 2 years 2.0349 (1+i)n -1/I (1+0.0349)^2/0.0349


Mortgage Repayment


Duration 18

Interest Rate 0.045



(1+I)^n -1

(1+I)^n-1 (1+0.045)^18-1= 1.208478766

I/(1+I)^n -1 0.045/1.208478766= 0.037236898

I + (I/(1+I)^n -1) 0.045+0.037236898= 0.082236898

I+I/(1+I)^n-1*Loan 0.125575*56917.03= £4,680.68


Outstanding



Balance £125,700


Amount of £1 P.a. @ 4.5% for 18 years 26.8550837 (1+i)n -1/I (1+0.045)618 -1/0.045

Outstanding £0.00

7.



Property 60% £195,000




Valuation Fee £450


Stamp Duty £9,750



Mortgage (60%) £206,650





(1+I)^n -1

(1+I)^n-1 (1+0.0349)^20-1= 0.985947388

I/(1+I)^n -1 0.0349/0.985947388= 0.035397426

I + (I/(1+I)^n -1) 0.0349+0.00.035397426= 0.070297426

I+I/(1+I)^n-1*Loan 0.070297426*206650= £14,526.96


Outstanding



Balance £221,326




Mortgage Repayment


Duration 18

Interest Rate 0.045



(1+I)^n -1

(1+I)^n-1 (1+0.045)^18-1= 1.208478766

I/(1+I)^n -1 0.045/1.208478766= 0.037236898

I + (I/(1+I)^n -1) 0.045+0.037236898= 0.082236898

I+I/(1+I)^n-1*Loan 0.125575*191764.95= £15,770.15


Outstanding



Balance £423,509


Amount of £1 P.a. @ 4.5% for 18 years 26.8550837 (1+i)n -1/I (1+0.045)^18/0.045

Outstanding £0.00

8.



Property 60% £195,000




Valuation Fee £450


Stamp Duty £9,750



Mortgage (60%) £206,650





(1+I)^n -1

(1+I)^n-1 (1+0.0349)^20-1= 0.985947388

I/(1+I)^n -1 0.0349/0.985947388= 0.035397426

I + (I/(1+I)^n -1) 0.0349+0.035397426= 0.070297426

I+I/(1+I)^n-1*Loan 0.070297426*200150= £14,526.96


Outstanding



Balance £221,326




Mortgage Repayment


Duration 18

Interest Rate 0.045



(1+I)^n -1

(1+I)^n-1 (1+0.045)^18-1= 1.208478766

I/(1+I)^n -1 0.045/1.208478766= 0.037236898

I + (I/(1+I)^n -1) 0.045+0.037236898= 0.082236898

I+I/(1+I)^n-1*Loan 0.125575*185733.15= £15,770.15


Outstanding



Balance £423,509



Outstanding £0.00

9.



Property 60% £225,000




Valuation Fee £500


Stamp Duty £11,250



Mortgage (60%) £238,250





(1+I)^n -1

(1+I)^n-1 (1+0.0349)^20-1= 0.985947388

I/(1+I)^n -1 0.0349/0.985947388= 0.035397426

I + (I/(1+I)^n -1) 0.0349+0.035397426= 0.070297426

I+I/(1+I)^n-1*Loan 0.070297426*230750= £16,748.36


Outstanding



Balance £255,170




Mortgage Repayment


Duration 18

Interest Rate 0.045



(1+I)^n -1

(1+I)^n-1 (1+0.045)^18-1= 1.208478766

I/(1+I)^n -1 0.045/1.208478766= 0.037236898

I + (I/(1+I)^n -1) 0.045+0.037236898= 0.082236898

I+I/(1+I)^n-1*Loan 0.125575*214129.03= £18,181.66


Outstanding



Balance £488,270



Outstanding £0.00

10.


Property 1

Subject Comparable 1 Comparable 2 Comparable 3 Comparable 4 Comparable 5

Price PCM x £650 £850 £975 £500 £1,000

2 Bedrooms 1 Bed 2 Bed 2 Bed 2 Bed 2 Bed

Good Condition Good Condition Good Condition Excellent Condition Good Condition Good Condition

Good Location Good Location Good Location Good Location Poor Good Location

Unfurnished Unfurnished Unfurnished Unfurnished Unfurnished Furnished

Adjustments

Bedrooms 30.77% 1.307692308

Condition -14.71% 0.852941176

Location 41.18% 1.411764706

Furnishings -17.65% 0.8235

Price PCM for Subject

Current Price £650 £850 £975 £500 £1,000

Price under Bedrooms £850.00 £975.00

Price under B + Condition £831.62

Price under B + C + Location £705.88

Price under B+ C + L + Furnishings £823.50

Price £850 £850 £832 £706 £824

Price PCM Between £706 and £850 Say £850

Appendix B

1.


Property 2


Price PCM x £495 £850 £900 £750 £995



Good Location Poor Location Good Location Good Location Good Location Good Location


Adjustments

Bedrooms 42% 1.14

Condition -20% 0.80

Location 45% 1.45

Furnishings -17% 0.83


Current Price £495 £850 £900 £750 £995

Price under Bedrooms £563.91 £854.41




Price £818 £850 £720 £826


2.


Property 3


Price PCM x £750 £850 £950 £775 £995



Good Location Good Location Good Location Good Location Poor Location Good Location


Adjustments

Bedrooms 12% 1.12

Condition -12% 0.88

Location 9% 1.09



Current Price £750 £850 £950 £775 £995

Price under Bedrooms £838.24




Price £838 £800 £838 £843 £826


3.


Property 4


Price PCM x £400 £450 £500 £390 £550





Adjustments

Bedrooms 11% 1.11

Condition -11% 0.89

Location 13% 1.13



Current Price £400 £450 £500 £390 £550





Price £444 £450 £444 £442 £457


4.


Property 5


Price PCM x £650 £800 £950 £460 £995


Excellent Condition Good Condition Good Condition Excellent Condition Good Condition Good Condition



Adjustments

Bedrooms 19% 1.19

Condition 16% 1.16

Location 43% 1.43



Current Price £650 £800 £950 £460 £995


Price under B + Condition £893.75 £926.32 £532.63 £1,152.11



Price £894 £926 £950 £759 £956


5.


6.

Property 6


Price PCM x £650 £800 £950 £460 £995


Excellent Condition Good Condition Good Condition Excellent Condition Good Condition Good Condition



Adjustments

Bedrooms 19% 1.19

Condition 16% 1.16

Location 43% 1.43



Current Price £650 £800 £950 £460 £995


Price under B + Condition £893.75 £926.32 £532.63 £1,152.11



Price £894 £926 £950 £759 £956



Property 7


Price PCM x £425 £525 £575 £450 £575





Adjustments

Bedrooms 19% 1.19

Condition -10% 0.90

Location 14% 1.14



Current Price £425 £525 £575 £450 £575





Price £506 £525 £520 £514 £477


7.


Property 8

Subject Comparable 1 Comparable 2 Comparable 3 Comparable 4

x £32,030 £45,000 £6,250 £12,430

306 298 404 72 104

Grade B Office Grade B Office Grade B Office Grade B Office Grade B Office

Good Location Good Location Good Location Good Location Good Location

Poor Condition Good Condition Good Condition Good Condition Good Condition

FRI FRI FRI FRI FRI

£/m2 £107.48 £111.39 £86.81 £119.52

Adjustments

Subject V Comparable 1 Comprabale 2 Comprabale 3 Comprabale 4

306m2 V 0.00% 0.00% 0.00% 0.00%

Grade B Office V 0.00% 0.00% 0.00% 0.00%

Good Location V 0.00% 0.00% 0.00% 0.00%

Poor Condition V -5.00% -5.00% -5.00% -5.00%

FRI V 0.00% 0.00% 0.00% 0.00%

Total Adjustments -5.00% -5.00% -5.00% -5.00%

Adjustemed £/m2 £102.11 £105.82 £82.47 £113.54

Amount P.a for subject £31,245.37 £32,379.95 £25,234.38 £34,744.24

Price £/m2 Between £82.47 and £113.54 Say £34745

8.


Property 9

Subject Comparable 1 Comparable 2 Comparable 3

x £64,000 £44,480 £12,420

337 750 516 128

Grade C Office Grade B Office Grade B Office Grade B Office

Good Location Good Location Good Location Good Location

Poor Condition Good Condition Good Condition Good Condition

FRI FRI FRI FRI

£/m2 £85.33 £86.20 £97.03

Adjustments

Subject V Comparable 1 Comprabale 2 Comprabale 3

337m2 V 0.00% 0.00% 0.00%

Grade B Office V -5.00% -5.00% -5.00%

Good Location V 0.00% 0.00% 0.00%

Poor Condition V -5.00% -5.00% -5.00%

FRI V 0.00% 0.00% 0.00%

Total Adjustments -10.00% -10.00% -10.00%

Adjustemed £/m2 £77 £78 £87

Amount P.a for subject £25,882 £26,145 £29,430

Price £/m2 Between £77 and £87 Say £29,430

9.


Property 10

Subject Comparable 1

x £12,250

277 132

Grade c Office Grade B Office

Good Location Good Location

Good Condition Good Condition

FRI FRI

£/m2 £92.80

Adjustments

Subject V Comparable 1

227m2 V 0.00%

Grade B Office V 0.00%

Good Location V 0.00%

Poor Condition V 0.00%

FRI V 0.00%

Total Adjustments 0.00%

Adjustemed £/m2 £92.80

Amount P.a for subject £25,706.44 £25,706.00

Price £/m2 £92.80 Say £25706

10.


Appendix C

1.

Property 1 Comparable 1 http://www.rightmove.co.uk/property-to-rent/property-36702808.html Comparable 2 http://www.rightmove.co.uk/property-to-rent/property-36720484.html Comparable 3 http://www.rightmove.co.uk/property-to-rent/property-36824647.html Comparable 4 http://www.rightmove.co.uk/property-to-rent/property-36404350.html Comparable 5 http://www.rightmove.co.uk/property-to-rent/property-37012528.html 2. Property 2 Comparable 1 http://www.rightmove.co.uk/property-to-rent/property-24956055.html Comparable 2 http://www.rightmove.co.uk/property-to-rent/property-8322259.html Comparable 3 http://www.rightmove.co.uk/property-to-rent/property-29475007.html Comparable 4 http://www.rightmove.co.uk/property-to-rent/property-25214943.html?premiumA=true Comparable 5 http://www.rightmove.co.uk/property-to-rent/property-25320387.html 3.

Property 3 Comparable 1 http://www.rightmove.co.uk/property-to-rent/property-40101734.html Comparable 2 http://www.rightmove.co.uk/property-to-rent/property-25011471.html Comparable 3 http://www.rightmove.co.uk/property-to-rent/property-24602007.html Comparable 4 http://www.rightmove.co.uk/property-to-rent/property-36733255.html Comparable 5 http://www.rightmove.co.uk/property-to-rent/property-36954124.html 4. Property 4 Comparable 1 http://www.rightmove.co.uk/property-to-rent/property-35760877.html Comparable 2 http://www.rightmove.co.uk/property-to-rent/property-15749385.html

http://www.rightmove.co.uk/property-to-rent/property-36702808.html








http://www.rightmove.co.uk/property-to-rent/property-25214943.html?premiumA=true









Comparable 3 http://www.rightmove.co.uk/property-to-rent/property-40383032.html Comparable 4 http://www.rightmove.co.uk/property-to-rent/property-31397299.html Comparable 5 http://www.rightmove.co.uk/property-to-rent/property-25326441.html 5. Property 5 + 6 Comparable 1 http://www.rightmove.co.uk/property-to-rent/property-40101734.html Comparable 2 http://www.rightmove.co.uk/property-to-rent/property-25011471.html Comparable 3 http://www.rightmove.co.uk/property-to-rent/property-24602007.html Comparable 4 http://www.rightmove.co.uk/property-to-rent/property-36954136.html Comparable 5 http://www.rightmove.co.uk/property-to-rent/property-36954124.html 6. Property 7 Comparable 1 http://www.rightmove.co.uk/property-to-rent/property-40316768.html Comparable 2 http://www.rightmove.co.uk/property-to-rent/property-40370153.html Comparable 3 http://www.rightmove.co.uk/property-to-rent/property-25359246.html Comparable 4 http://www.rightmove.co.uk/property-to-rent/property-24544257.html Comparable 5 http://www.rightmove.co.uk/property-to-rent/property-36014194.html 7. Property 8 Comparable 1 http://www.rightmove.co.uk/commercial-property-to-let/property-32184547.html Comparable 2 http://www.rightmove.co.uk/commercial-property-to-let/property-15558135.html Comparable 3 http://www.rightmove.co.uk/commercial-property-to-let/property-36744850.html?premiumA=true Comparable 4 http://www.rightmove.co.uk/commercial-property-to-let/property-21017406.html













http://www.rightmove.co.uk/commercial-property-to-let/property-32184547.html

http://www.rightmove.co.uk/commercial-property-to-let/property-15558135.html

http://www.rightmove.co.uk/commercial-property-to-let/property-36744850.html?premiumA=true

http://www.rightmove.co.uk/commercial-property-to-let/property-36744850.html?premiumA=true

Property Portfolio and Finances

Real Estate

Transcript of Property Portfolio and Finances