Investment Appraisal of Liverpool Page 1
Liverpool John Moores
12
Valuation Theory and
Investment Residential and Commercial Property in
Liverpool
392106
Investment Appraisal of Liverpool Page 2
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.
Investment Appraisal of Liverpool Page 3
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
Investment Appraisal of Liverpool Page 4
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
Investment Appraisal of Liverpool Page 5
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.
Investment Appraisal of Liverpool Page 6
2.3 Chosen Properties
Property 1 – Residential
Will achieve a rental income of around £850 (Appendix B 1)
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Property 2 - Residential
Will achieve a rental income of around £850 (Appendix B 2)
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Property 3 – Residential
Will achieve a rental income of around £825 (Appendix B 3)
Property 4 – Residential
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Will achieve a rental income of around £455 (Appendix B 4)
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Property 5 - Residential
Will achieve a rental income of around £955 (Appendix B 5)
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Property 6 - Residential
Will achieve a rental income of around £955 (Appendix B 6)
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Property 7 - Residential
Will achieve a rental income of around £525 (Appendix B 7)
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Property 8 - Office
Will achieve a rental income of around £34,745 P.a (Appendix B 8)
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Property 9 - Office
Will achieve a rental income of around £29,430 P.a (Appendix B 9)
Investment Appraisal of Liverpool Page 15
Property 10 - Office
Will achieve a rental income of around £25,706 P.a (Appendix B 10)
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).
Investment Appraisal of Liverpool Page 16
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
Investment Appraisal of Liverpool Page 17
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
Investment Appraisal of Liverpool Page 18
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).
Investment Appraisal of Liverpool Page 19
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.
Investment Appraisal of Liverpool Page 20
-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.
Investment Appraisal of Liverpool Page 21
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.
Investment Appraisal of Liverpool Page 22
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
Investment Appraisal of Liverpool Page 23
Property 2
Mortgage Deposit £51,980
Mortgage Repayments £5,677.85
Mortgage Repayments after 2 years £6,163.03
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 -£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 D Inflow £137,387.17 Total PV Net Cash £58,127
Total D Outflow -£131,239.72
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
Investment Appraisal of Liverpool Page 24
Property 3
Mortgage Deposit £86,000
Mortgage Repayments £9,346.04
Mortgage Repayments after 2 years £10,145.86
Rent P.a(2013) £9,900.00
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 -£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 D Inflow £133,346.37 Total PV Net Cash £2,867
Total D Outflow -£216,478.91
Total -£83,132.54
Profitibility Index 0.05516 Loss
Discounted Pay Back >20 Years No
Net Present Value -£83,133 Loss
IRR -21.80% Loss
MIRR 3% Loss
Property 3
Investment Appraisal of Liverpool Page 25
Property 4
Mortgage Deposit £14,800
Mortgage Repayments £1,640.04
Mortgage Repayments after 2 years £1,780.39
Rent P.a(2013) £5,460.00
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 -£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 D Inflow £73,542.54 Total PV Net Cash £50,646
Total D Outflow -£37,696.37
Total £35,846.17
Profitibility Index 3.42204 Profit
Discounted Pay Back 4.29 Within Time
Net Present Value £35,846 Profit
IRR 26.00% Profit
MIRR 6% Profit
Property 4
Investment Appraisal of Liverpool Page 26
Property 5
Mortgage Deposit £96,000
Mortgage Repayments £10,418.08
Mortgage Repayments after 2 years £11,309.64
Rent P.a(2013) £11,460.00
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 -£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 D Inflow £154,358.52 Total PV Net Cash £8,913
Total D Outflow -£241,445.48
Total -£87,086.96
Profitibility Index 0.09284 Loss
Discounted Pay Back >20 Years No
Net Present Value -£87,087 Loss
IRR -14.76% Loss
MIRR 3% Loss
Property 5
Investment Appraisal of Liverpool Page 27
Property 6
Mortgage Deposit £75,980
Mortgage Repayments £8,313.97
Mortgage Repayments after 2 years £8,827.89
Rent P.a(2013) £11,460.00
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 -£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 D Inflow £154,358.52 Total PV Net Cash £40,488
Total D Outflow -£189,850.23
Total -£35,491.71
Profitibility Index 0.53288 Loss
Discounted Pay Back >20 Years No
Net Present Value -£35,492 Loss
IRR -1.86% Loss
MIRR 3% Loss
Property 6
Investment Appraisal of Liverpool Page 28
Property 7
Mortgage Deposit £39,980
Mortgage Repayments £4,311.69
Mortgage Repayments after 2 years £4,680.68
Rent P.a(2013) £6,300.00
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 -£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 D Inflow £84,856.78 Total PV Net Cash £24,662
Total D Outflow -£100,174.99
Total -£15,318.21
Profitibility Index 0.61685 Loss
Discounted Pay Back >20 Years No
Net Present Value -£15,318 Loss
IRR -0.55% Loss
MIRR 4% Loss
Property 7
Investment Appraisal of Liverpool Page 29
Property 8
Mortgage Deposit £130,000
Mortgage Repayments £14,526.96
Mortgage Repayments after 2 years £15,770.15
Rent P.a(2013) £34,745.00
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 -£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 D Inflow £467,991.87 Total PV Net Cash £265,183
Total D Outflow -£332,809.03
Total £135,182.84
Profitibility Index 2.03987 Profit
Discounted Pay Back 7.67 Within Time
Net Present Value £135,183 Profit
IRR 14.68% Profit
MIRR 5% Profit
Property 8
Investment Appraisal of Liverpool Page 30
Propert 9
Mortgage Deposit £130,000
Mortgage Repayments £14,526.96
Mortgage Repayments after 2 years £15,770.15
Rent P.a(2013) £29,430.00
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 -£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 D Inflow £396,402.38 Total PV Net Cash £193,593
Total D Outflow -£332,809.03
Total £63,593.35
Profitibility Index 1.48918 Profit
Discounted Pay Back 11.32 Within Time
Net Present Value £63,593 Profit
IRR 9.65% Profit
MIRR 4% Profit
Property 9
Investment Appraisal of Liverpool Page 31
Propert 10
Mortgage Deposit £150,000
Mortgage Repayments £16,748.30
Mortgage Repayments after 2 years £18,181.66
Rent P.a(2013) £25,706.00
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 -£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 D Inflow £392,838.74 Total PV Net Cash £185,870
Total D Outflow -£356,968.86
Total £35,869.88
Profitibility Index 1.23913 Profit
Discounted Pay Back 14.70 Within Time
Net Present Value £35,870 Profit
IRR 7.02% Profit
MIRR 4% Profit
Property 10
Investment Appraisal of Liverpool Page 32
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.
Investment Appraisal of Liverpool Page 33
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.
Investment Appraisal of Liverpool Page 34
Property 4
Mortgage Deposit £14,800
Mortgage Repayments £1,640.04
Mortgage Repayments after 2 years £1,780.39
Rent P.a(2013) £5,460.00
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 -£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 D Inflow £73,542.54 Total PV Net Cash £50,646
Total D Outflow -£37,696.37
Total £35,846.17
Profitibility Index 3.42204 Profit
Discounted Pay Back 4.29 Within Time
Net Present Value £35,846 Profit
IRR 26.00% Profit
MIRR 6% Profit
Profitibility Index 2.89836 Profit
Discounted Pay Back 3.46 Within Time
Net Present Value £28,096 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.
Investment Appraisal of Liverpool Page 35
Profitibility Index 3.39321 Profit
Discounted Pay Back 3.67 Within Time
Net Present Value £35,419 Profit
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.
Investment Appraisal of Liverpool Page 36
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
[Accessed: 8th January, 2012]
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
[Accessed: 8th January, 2012]
Zoopla, Current Property Values in Liverpool [Online].
Available from: http://www.zoopla.co.uk/home-values/liverpool/
[Accessed: 13th December, 2012]
Investment Appraisal of Liverpool Page 37
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
Mortgage Required £120,560
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
I + SF = I + I * Loan
(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
Amount borrowed £111,876
Amount of £1 @ 4.5% for 18 years 2.208478766 A=(1+i)n (1+0.045)^18
Balance £247,076
Less Payments £9,200.34
Amount 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
Appendix A
1.
Investment Appraisal of Liverpool Page 38
Property 2 £129,950
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
Initial Mortgage Repayment
Mortgage Required £80,760
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*80760= £5,677.18
Initial Mortgage Repayments P.a. £5,677.18
Outstanding
Amount borrowed £80,760
Amount of £1 @ 3.49% for 2 years 1.07101801 A=(1+i)n (1+0.0349)^2
Balance £86,495
Less Payments £5,677.18
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 £74,942.38
Mortgage Repayment
Mortgage £74,942.38
Duration 18
Interest Rate 0.045
Mortgage Repayments Formula
I + SF = I + I * Loan
(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
Mortgage Repayments P.a £6,163.03
Outstanding
Amount borrowed £74,942
Amount of £1 @ 4.5% for 18 years 2.208478766 A=(1+i)n (1+0.045)^18
Balance £165,509
Less Payments £6,163.03
Amount 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
2.
Investment Appraisal of Liverpool Page 39
Property 3 £215,000
Property 60% £129,000
Completion Fee £450
Solicitor Fee + Disbursement £750
Higher Lending Charge £0
Valuation Fee £400
Land Registry - Voluntary £200
Stamp Duty £2,150
Mortgage Required £132,950
Initial Mortgage Repayment
Mortgage (60%) £132,950
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*132950= £9,346.04
Initial Mortgage Repayments P.a. £9,346.04
Outstanding
Amount borrowed £132,950
Amount of £1 @ 3.49% for 2 years 1.07101801 A=(1+i)n (1+0.0349)^2
Balance £142,392
Less Payments £9,346.04
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 £123,373.58
Mortgage Repayment
Mortgage £123,373.58
Duration 18
Interest Rate 0.045
Mortgage Repayments Formula
I + SF = I + I * Loan
(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
Mortgage Repayments P.a £10,145.86
Outstanding
Amount borrowed £123,374
Amount of £1 @ 4.5% for 18 years 2.208478766 A=(1+i)n (1+0.045)^18
Balance £272,468
Less Payments £10,145.86
Amount 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
3.
Investment Appraisal of Liverpool Page 40
Property 4 £37,000
Property 60% £22,200
Completion Fee £450
Solicitor Fee + Disbursement £400
Higher Lending Charge £0
Valuation Fee £250
Land Registry - Voluntary £30
Stamp Duty £0
Mortgage Required £23,330
Initial Mortgage Repayment
Mortgage (60%) £23,330
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*23330= £1,640.04
Initial Mortgage Repayments P.a. £1,640.04
Outstanding
Amount borrowed £23,330
Amount of £1 @ 3.49% for 2 years 1.07101801 A=(1+i)n (1+0.0349)^2
Balance £24,987
Less Payments £1,640.04
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 £21,649.53
Mortgage Repayment
Mortgage £21,649.53
Duration 18
Interest Rate 0.045
Mortgage Repayments Formula
I + SF = I + I * Loan
(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
Mortgage Repayments P.a £1,780.39
Outstanding
Amount borrowed £21,650
Amount of £1 @ 4.5% for 18 years 2.208478766 A=(1+i)n (1+0.045)^18
Balance £47,813
Less Payments £1,780.39
Amount 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
4.
Investment Appraisal of Liverpool Page 41
Property 5 £240,000
Property 60% £144,000
Completion Fee £450
Solicitors Fee + Disbursement £750
Higher Lending Charge £0
Valuation Fee £400
Land Registry - Voluntary £200
Stamp Duty £2,400
Mortgage Required £148,200
Initial Mortgage Repayment
Mortgage (60%) £148,200
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*148200= £10,418.08
Initial Mortgage Repayments P.a. £10,418.08
Outstanding
Amount borrowed £148,200
Amount of £1 @ 3.49% for 2 years 1.07101801 A=(1+i)n (1+0.0349)^2
Balance £158,725
Less Payments £10,418.08
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 £137,525.12
Mortgage Repayment
Mortgage £137,525.12
Duration 18
Interest Rate 0.045
Mortgage Repayments Formula
I + SF = I + I * Loan
(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
Mortgage Repayments P.a £11,309.64
Outstanding
Amount borrowed £137,525
Amount of £1 @ 4.5% for 18 years 2.208478766 A=(1+i)n (1+0.045)18
Balance £303,721
Less Payments £11,309.64
Amount 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
5.
Investment Appraisal of Liverpool Page 42
Property 6 £189,950
Property 60% £112,170
Completetion Fee £450
Solicters Fee + Disbursement £670
Higher Lending Charge £0
Valuation Fee £350
Land Registry - Voluntary £140
Stamp Duty £1,900
Mortgage Required £115,680
Inital Mortgage Repayment
Mortgage (60%) £115,680
Inital Duration (Years) 20
Inital Interest Rate 0.0349
Inital 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*115680= £8,131.97
Inital Mortgage Repayments P.a. £8,131.97
Outstanding
Amount borrowed £115,680
Amount of £1 @ 3.49% for 2 years 1.07101801 A=(1+i)n (1+0.0349)^2
Balance £123,895
Less Payments £8,131.97
Amout of £1 P.a. @ 3.49% for 2 years 2.0349 (1+i)n -1/I (1+0.0349)^2/0.0349
Outstanding £107,347.08
Mortgage Repayment
Mortgage £107,347.08
Duration 18
Interest Rate 0.045
Mortgage Repayments Formula
I + SF = I + I * Loan
(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
Mortgage Repayments P.a £8,827.89
Outstanding
Amount borrowed £107,347
Amount of £1 @ 4.5% for 18 years 2.208478766 A=(1+i)n (1+0.045)18
Balance £237,074
Less Payments £8,827.89
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.
Investment Appraisal of Liverpool Page 43
Property 7 £99,950
Property 60% £59,970
Completion Fee £450
Solicitors Fee + Disbursement £550
Higher Lending Charge £0
Valuation Fee £275
Land Registry - Voluntary £90
Stamp Duty £0
Mortgage Required £61,335
Initial Mortgage Repayment
Mortgage (60%) £61,335
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*61335= £4,311.69
Initial Mortgage Repayments P.a. £4,311.69
Outstanding
Amount borrowed £61,335
Amount of £1 @ 3.49% for 2 years 1.07101801 A=(1+i)n (1+0.0349)^2
Balance £65,691
Less Payments £4,311.69
Amount of £1 P.a. @ 3.49% for 2 years 2.0349 (1+i)n -1/I (1+0.0349)^2/0.0349
Outstanding £56,917.03
Mortgage Repayment
Mortgage £56,917.03
Duration 18
Interest Rate 0.045
Mortgage Repayments Formula
I + SF = I + I * Loan
(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
Mortgage Repayments P.a £4,680.68
Outstanding
Amount borrowed £56,917
Amount of £1 @ 4.5% for 18 years 2.208478766 A=(1+i)n (1+0.045)18
Balance £125,700
Less Payments £4,680.68
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.
Investment Appraisal of Liverpool Page 44
Property 8 £325,000
Property 60% £195,000
Completion Fee £450
Solicitors Fee + Disbursement £800
Higher Lending Charge £0
Valuation Fee £450
Land Registry - Voluntary £200
Stamp Duty £9,750
Mortgage Required £206,650
Initial Mortgage Repayment
Mortgage (60%) £206,650
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+0.00.035397426= 0.070297426
I+I/(1+I)^n-1*Loan 0.070297426*206650= £14,526.96
Initial Mortgage Repayments P.a. £14,526.96
Outstanding
Amount borrowed £206,650
Amount of £1 @ 3.49% for 2 years 1.07101801 A=(1+i)n (1+0.0349)^2
Balance £221,326
Less Payments £14,526.96
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 £191,764.95
Mortgage Repayment
Mortgage £191,764.95
Duration 18
Interest Rate 0.045
Mortgage Repayments Formula
I + SF = I + I * Loan
(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
Mortgage Repayments P.a £15,770.15
Outstanding
Amount borrowed £191,765
Amount of £1 @ 4.5% for 18 years 2.208478766 A=(1+i)n (1+0.045)^18
Balance £423,509
Less Payments £15,770.15
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.
Investment Appraisal of Liverpool Page 45
Property 9 £325,000
Property 60% £195,000
Completion Fee £450
Solicitors Fee + Disbursement £800
Higher Lending Charge £0
Valuation Fee £450
Land Registry - Voluntary £200
Stamp Duty £9,750
Mortgage Required £206,650
Initial Mortgage Repayment
Mortgage (60%) £206,650
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*200150= £14,526.96
Initial Mortgage Repayments P.a. £14,526.96
Outstanding
Amount borrowed £206,650
Amount of £1 @ 3.49% for 2 years 1.07101801 A=(1+i)n (1+0.0349)^2
Balance £221,326
Less Payments £14,526.96
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 £191,764.95
Mortgage Repayment
Mortgage £191,764.95
Duration 18
Interest Rate 0.045
Mortgage Repayments Formula
I + SF = I + I * Loan
(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
Mortgage Repayments P.a £15,770.15
Outstanding
Amount borrowed £191,765
Amount of £1 @ 4.5% for 18 years 2.208478766 A=(1+i)n (1+0.045)18
Balance £423,509
Less Payments £15,770.15
Amount 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
9.
Investment Appraisal of Liverpool Page 46
Property 10 £375,000
Property 60% £225,000
Completion Fee £450
Solicitors Fee + Disbursement £850
Higher Lending Charge £0
Valuation Fee £500
Land Registry - Voluntary £200
Stamp Duty £11,250
Mortgage Required £238,250
Initial Mortgage Repayment
Mortgage (60%) £238,250
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*230750= £16,748.36
Initial Mortgage Repayments P.a. £16,748.36
Outstanding
Amount borrowed £238,250
Amount of £1 @ 3.49% for 2 years 1.07101801 A=(1+i)n (1+0.0349)^2
Balance £255,170
Less Payments £16,748.36
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 £221,088.80
Mortgage Repayment
Mortgage £221,088.80
Duration 18
Interest Rate 0.045
Mortgage Repayments Formula
I + SF = I + I * Loan
(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
Mortgage Repayments P.a £18,181.66
Outstanding
Amount borrowed £221,089
Amount of £1 @ 4.5% for 18 years 2.208478766 A=(1+i)n (1+0.045)18
Balance £488,270
Less Payments £18,181.66
Amount 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
10.
Investment Appraisal of Liverpool Page 47
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.
Investment Appraisal of Liverpool Page 48
Property 2
Subject Comparable 1 Comparable 2 Comparable 3 Comparable 4 Comparable 5
Price PCM x £495 £850 £900 £750 £995
3 Bedrooms 1 Bed 3 Bed 2 Bed 2 Bed 2 Bed
Good Condition Good Condition Good Condition Excellent Condition Good Condition Good Condition
Good Location Poor Location Good Location Good Location Good Location Good Location
Unfurnished Unfurnished Unfurnished Unfurnished Unfurnished Furnished
Adjustments
Bedrooms 42% 1.14
Condition -20% 0.80
Location 45% 1.45
Furnishings -17% 0.83
Price PCM for Subject
Current Price £495 £850 £900 £750 £995
Price under Bedrooms £563.91 £854.41
Price under B + Condition £720.00
Price under B + C + Location £817.67
Price under B+ C + L + Furnishings £825.85
Price £818 £850 £720 £826
Price PCM Between £720 and £850 Say £850
2.
Investment Appraisal of Liverpool Page 49
Property 3
Subject Comparable 1 Comparable 2 Comparable 3 Comparable 4 Comparable 5
Price PCM x £750 £850 £950 £775 £995
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 Location Good Location
Unfurnished Unfurnished Unfurnished Unfurnished Unfurnished Furnished
Adjustments
Bedrooms 12% 1.12
Condition -12% 0.88
Location 9% 1.09
Furnishings -17% 0.83
Price PCM for Subject
Current Price £750 £850 £950 £775 £995
Price under Bedrooms £838.24
Price under B + Condition £838.24
Price under B + C + Location £843.38
Price under B+ C + L + Furnishings £825.85
Price £838 £800 £838 £843 £826
Price PCM Between £772 and £826 Say £825
3.
Investment Appraisal of Liverpool Page 50
Property 4
Subject Comparable 1 Comparable 2 Comparable 3 Comparable 4 Comparable 5
Price PCM x £400 £450 £500 £390 £550
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 Location Good Location
Unfurnished Unfurnished Unfurnished Unfurnished Unfurnished Furnished
Adjustments
Bedrooms 11% 1.11
Condition -11% 0.89
Location 13% 1.13
Furnishings -22% 0.83
Price PCM for Subject
Current Price £400 £450 £500 £390 £550
Price under Bedrooms £444.44
Price under B + Condition £444.44
Price under B + C + Location £442.00
Price under B+ C + L + Furnishings £456.50
Price £444 £450 £444 £442 £457
Price PCM Between £442 and £457 Say £455
4.
Investment Appraisal of Liverpool Page 51
Property 5
Subject Comparable 1 Comparable 2 Comparable 3 Comparable 4 Comparable 5
Price PCM x £650 £800 £950 £460 £995
2 Bedrooms 1 Bed 2 Bed 2 Bed 2 Bed 2 Bed
Excellent Condition Good Condition Good Condition Excellent Condition Good Condition Good Condition
Good Location Good Location Good Location Good Location Poor Location Good Location
Unfurnished Unfurnished Unfurnished Unfurnished Unfurnished Furnished
Adjustments
Bedrooms 19% 1.19
Condition 16% 1.16
Location 43% 1.43
Furnishings -24% 0.83
Price PCM for Subject
Current Price £650 £800 £950 £460 £995
Price under Bedrooms £771.88
Price under B + Condition £893.75 £926.32 £532.63 £1,152.11
Price under B + C + Location £759.00
Price under B+ C + L + Furnishings £956.25
Price £894 £926 £950 £759 £956
Price PCM Between £759 and £956 Say £955
5.
Investment Appraisal of Liverpool Page 52
6.
Property 6
Subject Comparable 1 Comparable 2 Comparable 3 Comparable 4 Comparable 5
Price PCM x £650 £800 £950 £460 £995
2 Bedrooms 1 Bed 2 Bed 2 Bed 2 Bed 2 Bed
Excellent Condition Good Condition Good Condition Excellent Condition Good Condition Good Condition
Good Location Good Location Good Location Good Location Poor Location Good Location
Unfurnished Unfurnished Unfurnished Unfurnished Unfurnished Furnished
Adjustments
Bedrooms 19% 1.19
Condition 16% 1.16
Location 43% 1.43
Furnishings -24% 0.83
Price PCM for Subject
Current Price £650 £800 £950 £460 £995
Price under Bedrooms £771.88
Price under B + Condition £893.75 £926.32 £532.63 £1,152.11
Price under B + C + Location £759.00
Price under B+ C + L + Furnishings £956.25
Price £894 £926 £950 £759 £956
Price PCM Between £759 and £956 Say £955
Investment Appraisal of Liverpool Page 53
Property 7
Subject Comparable 1 Comparable 2 Comparable 3 Comparable 4 Comparable 5
Price PCM x £425 £525 £575 £450 £575
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 Location Good Location
Unfurnished Unfurnished Unfurnished Unfurnished Unfurnished Furnished
Adjustments
Bedrooms 19% 1.19
Condition -10% 0.90
Location 14% 1.14
Furnishings -10% 0.83
Price PCM for Subject
Current Price £425 £525 £575 £450 £575
Price under Bedrooms £505.95
Price under B + Condition £520.24
Price under B + C + Location £514.29
Price under B+ C + L + Furnishings £477.25
Price £506 £525 £520 £514 £477
Price PCM Between £477 and £525 Say £525
7.
Investment Appraisal of Liverpool Page 54
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.
Investment Appraisal of Liverpool Page 55
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.
Investment Appraisal of Liverpool Page 56
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.
Investment Appraisal of Liverpool Page 57
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
Investment Appraisal of Liverpool Page 58
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
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