Property Investment and Risk Management: Lydbrook Street Analysis

This report presents a comprehensive analysis of a property investment opportunity located at 5/17 Lydbrook Street, Westmead, NSW. It begins with an introduction to the property, including its sale history, features, and location within the City of Parramatta. The report then examines the broader property market in New South Wales, highlighting its vibrancy and potential for investors. It includes market data on median sale prices in Westmead. The report also details mortgage requirements, including interest rates and loan repayment calculations. Furthermore, the report analyzes key financial ratios, such as gross income ratio, effective gross income ratio, and net income ratio, to assess the profitability of the investment. The analysis uses a tenancy schedule and income schedule to project income and expenses over a 10-year period. The conclusion indicates that based on the current property value and financial projections, the investment may not be profitable at the present time. The report is supported by references to relevant sources, including property valuation websites and real estate market reports.

Running head: PROPERTY INVESTMENT AND RISK MANAGEMENT
Property Investment and Risk Management
Name of the Student:
Name of the University:
Authors Note:

1PROPERTY INVESTMENT AND RISK MANAGEMENT
Contents
Introduction:....................................................................................................................................2
Property market:..............................................................................................................................3
Mortgage requirements:...................................................................................................................4
Analysis of important ratios:...........................................................................................................5
Conclusion:......................................................................................................................................7
References:......................................................................................................................................9

2PROPERTY INVESTMENT AND RISK MANAGEMENT
Introduction:
5/17 Lydbrook Street Westmead New South Wales (NSW) 2145 is a property last sold on
19th March 2018 for $480,000. The property has 2 bedrooms with 2 bathrooms and a space for a
single car. The land size of the property is 95 square meter with 71 square meter of floor area.
The property is located within the council area of City of Paramatta. It was built in the year 2016
and last sold in 2018 as a single unit ("5/17 Lydbrook Street Westmead NSW 2145 Sold Prices
and Statistics", 2019).
Image: Location map of 5/17 Lydbrook Street Westmead New South Wales (NSW) 2145.
As can be seen from the above map that the property is located in Paramatta City Council and
has a good transport system with number of Main Street and roads close by. The proximity of
park, dental hospital, primary schools and driving schools have enhanced the value of the

3PROPERTY INVESTMENT AND RISK MANAGEMENT
property. There are number of local schools within 100 meter radius of the property has
increased the desirability of the buyers to acquire the property.
Property market:
The property market in NSW is vibrant and provides the investors an opportunity to earn
significant profit from purchase and sale transaction of properties ("Positive Views of Unions
and Business on the Rise", 2017). The investors also have the opportunity to earn significant
return by renting the properties due to the huge demand of properties in the NSW region. The
demand and supply of properties in the NSW region are quite substantial and contribute in
making the property market in the region extremely vibrant and prosperous (Agboola, 2018).
The chart below shows the median sale price of properties in Westmead over the last 10 years
(2019).
Image 2: Median sale price of properties in last 10 years in Westmead NSW.
The current median sale price of houses in Westmead region of NSW is within the range of
$475,000 to $575,000. Considering that the property was last sold merely a year ago the value of
the property at present is extremely difficult to calculate due to lack of evidence to support the
appreciation or depreciation in the value of the property since its acquisition.

4PROPERTY INVESTMENT AND RISK MANAGEMENT
Mortgage requirements:
Mortgage borrowing facility in Australia allows the investors to acquire high priced properties
by availing mortgage loans at relatively low rate of interest as compared to the rate of interest
applicable for non-mortgage loans.
Mortgage requirements in the region of NSW is quite strict to ensure that the recovery of such
loans is very high. The property value along with the ability of the borrower to repay the loan
amount the quantum of mortgage loan is sanctioned. There are two rates of interests applicable
for mortgage loans in the region; these are variable rate of interest per annum, i.e. 3.74% per
annum at the present and comparison rate of 3.76% per annum.
Timeline Value of the property
Mar-18 480,000.00
Jul-19 536,000.00
Gain on property 56,000.00
Note: $536,000 is the median price of a similar house in Westmead at the time of calculation.
Thus, an investor looking to acquire the 5/17 Lydbrook Street Property at present will have to
shell out approximately $536,000 for the property as the median price of the property on the
basis of the median price of such house in the region is around $536,000 as can be seen in the
above table (School, School & School, 2019).

5PROPERTY INVESTMENT AND RISK MANAGEMENT
Analysis of important ratios:
Assuming that a prospective buyer will finance the entire value of the property by taking a
mortgage loan then the expected annual repayment of loan would be as following.
When the price of the house is $480,000 and the entire amount is taken as loan by mortgaging
the property with 30 years term the annual installment would be $26,888.86 (Detailed
calculations are shown in attached excel sheet).
Since the current price of such house is expected to be $536,000 the annual repayment required
to repay the loan of $536,000 if the entire cost of the house is financed by mortgage loan at
present will be $30,025.90 (Trembecka & Kwartnik-Pruc, 2018).
Tenancy schedule on the basis of available information and assumption is prepared below:
Tenancy Schedule
Yea
r
Annual rent Municipality tax Repair and maintenance
1 24,192.00 2,400.00 1,209.60
2 24,192.00 2,400.00 1,209.60
3 24,192.00 2,400.00 1,209.60
4 24,192.00 2,400.00 1,209.60

6PROPERTY INVESTMENT AND RISK MANAGEMENT
5 24,192.00 2,400.00 1,209.60
6 24,192.00 2,400.00 1,209.60
7 24,192.00 2,400.00 1,209.60
8 24,192.00 2,400.00 1,209.60
9 24,192.00 2,400.00 1,209.60
10 24,192.00 2,400.00 1,209.60
Weekly rent of $504 has been considered to calculate the annual expected rent from such
property for calculation of rent and expenses of the property.
The income schedule on the basis of above tenancy schedule is prepared below to assess the
desirability of the property.
Year Gross income effective gross income Net income
1 24,192.00 24,192.00 (5,833.90)
2 24,192.00 24,192.00 (5,833.90)
3 24,192.00 24,192.00 (5,833.90)
4 24,192.00 24,192.00 (5,833.90)
5 24,192.00 24,192.00 (5,833.90)
6 24,192.00 24,192.00 (5,833.90)
7 24,192.00 24,192.00 (5,833.90)

7PROPERTY INVESTMENT AND RISK MANAGEMENT
8 24,192.00 24,192.00 (5,833.90)
9 24,192.00 24,192.00 (5,833.90)
10 24,192.00 24,192.00 (5,833.90)
On the basis of above calculations various ratios are calculated below.
Different ratios (%)
Gross income ratio 4.5
1
Effective gross income ratio 4.5
1
Net income ratio (1.0
9)
The expected gross income ratio and net income ratio from the property expected to be 4.51%
and (1.09%) respectively on the current value of the property, i.e. $536,000.
Conclusion:
The ratio calculation shows that the investors are expected to suffer losses if decides to invest on
the particular property at the present moment due to the high price of the property. Thus, the

8PROPERTY INVESTMENT AND RISK MANAGEMENT
investors should wait till the price of the property is reduced a bit. The buyer who brought house
in 2018 however has certainly made an unrealized gain of $56,000 as the property is currently
valued at $536,000.
Thus, in conclusion it is clear that this particular property situated in 5/17 Lydbrook Street is not
a profitable option for the investor to invest and earn return on such investment. Hence, the
investor should not acquire the property at this particular point of time by taking a mortgage loan
(Wills, 2017).

9PROPERTY INVESTMENT AND RISK MANAGEMENT
References:
5/17 Lydbrook Street Westmead NSW 2145 Sold Prices and Statistics. (2019). Retrieved 28 July
2019, from https://www.propertyvalue.com.au/property/5/17-lydbrook-street-westmead-
nsw-2145/18028227
(2019). Retrieved 28 July 2019, from https://www.realestate.com.au/property/unit-5-17-
lydbrook-st-westmead-nsw-2145
Positive Views of Unions and Business on the Rise. (2017). Management Report For Nonunion
Organizations, 40(4), 8-8. doi: 10.1002/mare.30262
School, D., School, P., & School, C. (2019). Property Report for 5/17 Lydbrook Street,
Westmead NSW 2145. Retrieved 28 July 2019, from https://www.domain.com.au/property-
profile/5-17-lydbrook-street-westmead-nsw-2145
Trembecka, A., & Kwartnik-Pruc, A. (2018). Problems of Real Estate Management with Respect
to Claims for Restitution of Expropriated Properties. Real Estate Management And
Valuation, 26(3), 105-112. doi: 10.2478/remav-2018-0029
Wills, P. (2017). Corporate real estate practice in Australia. Journal Of Corporate Real
Estate, 12(3), 40-53. doi: 10.1108/14630010810881658