Financial Real Estate Investment Portfolio

In this assignment you are required to locate and assess the investment potential of at least 3 income producing properties over a 10 year holding period. You may choose to invest in any number of buildings/apartments you feel appropriate given your budget. However, you must evaluate at least 3 before deciding on your final portfolio; your final investment portfolio can consist of as many or as few buildings you wish.

Specifically you have been allocated GBP£500,000.00; you will use this to select potential purchases for financial appraisal and forecasting. All investment analysis will be carried out over a 10 year holding period in £GBP using the 5 point appraisal method given in the Portfolio Brief:

(Repayment Calculation, Year 1 BTCF including exceptional items e.g. stamp duty land tax, product fees etc, Forecasted Before Tax Cash Flows, Equity Reversion, PV Analysis)

You should try to include a complete assumption set consisting of accurate costs (product fees, stamp duty, legal fees, management fees etc), rents, and any annual increases. You must also choose loan finance in the form of a self-amortizing mortgage from the marketplace; you should justify any assumptions with credible comparisons.

The format of your report should include:

Market and Portfolio Appraisal – explain, justify, discuss and critique non quantifiable choices, e.g. area appraisal/location, historic rates, realistic goals/achievable yields, building type(s).

Financial Strategy – explain, justify, discuss and critique financial elements, what are the benefits of different financial products, vs. debt to equity levels/loan terms within a risk return framework, decide on appropriate interest rate(s) for NPV analysis.

Portfolio Evaluation – excel sheets detailing investment portfolio forecasts, comparison of investment with differing financial terms (at least two). Perform Equity Reversion using rental yield to calculate future sale price.

Conclusions and Recommendations – Rate your analysis, what is the likely cash flow differential, how would you critique the Equity Reversion/PV analysis. Is the analysis thorough enough to recommend or oppose the investment?

Minimum of 1500 words

For simplicity, the geographical location of the properties within the portfolio should be constrained to London. However, if a student would like to consider another location or develop a more diversified portfolio of properties from several global cities they must seek permission from the module co-ordinator; permission will only be granted to those students who convince their module co-ordinator that sufficient information is available to locate and appraise properties in their chosen location(s).

Balanced Appraisal:
Remember – this brief is about evaluating a portfolio of income producing properties using accurate investment appraisal techniques; you must weigh up likely incomes, account for costs, vacancies, tax’s etc. Marks are not awarded to students who purport to achieve the highest returns; rather, a student who accurately appraised a bad portfolio, advising against investment would likely score just as well.

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