Investment Analysis Report: Queensland Property Investment Analysis

This report presents a comprehensive investment analysis of two properties located in Brisbane, Queensland, Australia. The analysis begins with a market overview of the properties, including details such as property type, area, cost, and prevailing market conditions. This is followed by a detailed investment analysis, which includes the calculation of Net Present Value (NPV) and Internal Rate of Return (IRR) for each property over a five-year period. The analysis incorporates various financial factors, such as rental income, operating expenses, inflation rates, and resale values, to determine the profitability and investment potential of each property. The report provides detailed working notes and calculations to support the findings, enabling an investor to make an informed decision. The conclusion and recommendations are based on the financial outcomes of the investment analysis.

Running head: INVESTMENT ANALYSIS
Investment Analysis
Name of the Student:
Name of the University:
Authors Note:

1
INVESTMENT ANALYSIS
Contents
Introduction:....................................................................................................................................2
Market analysis:...............................................................................................................................2
Investment analysis:.........................................................................................................................8
Conclusion and recommendations:................................................................................................23
References:....................................................................................................................................26

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INVESTMENT ANALYSIS
Introduction:
The two properties selected for the purpose of analysing the possibilities of investing in these
properties from the point of view of an investor are both situated in the state of Queensland,
Australia. First property to be analysed for the purpose of investment is 4503/71 Eagle Street,
Brisbane City QLD 4000 and the second property is situated at 222 Margaret Street, Brisbane
City QLD 4000.
The first property, 4503/71 Eagle Street, has a total floor area of 1,200 square meter is situated
near the Brisbane Metro makes it a hot property for the investors. Second property located at 222
Margaret Street is relatively small property with a total floor area of 500 square meter. However,
the biggest difference between the two properties is the facilities available in 4503/71 Eagle
Street are significantly more than the facilities in second property (Dwomoh, 2018). Taking into
consideration the market condition in the Queensland for similar properties a detailed analysis of
the two properties from the perspective of an investor is provided below.
Market analysis:
The market analysis of the property situated at 4503/71 Eagle Street is conducted below using
the following data table about the property.
Property 4503/71 Eagle Street, Brisbane City QLD
4000
Address of the property 4503/71 Eagle Street, Brisbane City QLD
4000

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INVESTMENT ANALYSIS
Queensland
Type of property Rental property
Property area in square meter : 1200 Square meter
Property cost $28,000,000
Number of years for the analysis 5
Rate of inflation 6%
Expenses expected to be reimbursed
Maintenance $5.00 Per square meter
Property tax $12,000 per yr.
Property Insurance $15,000.00 per yr.
Utilities $15.00 Per square meter
Administrative expenses $20.00 Per square meter
Expenses (It is not to be reimbursed)
Management expenses 5% of Annual gross rent

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INVESTMENT ANALYSIS
Terms and conditions
Market Rent $3,000.00 Per square meter
Capital improvement expenses $25.00 0
Tenancy period 5 years
Assumptions for resale at the end of year 5
Cap rate applicable for terminal value 12%
Commission on resale 5%
Market rate of interest (to be used as cost of
capital)
12.00%
As per the available information about the above property it is expected that the annual rent of
$3000 can be charged per square meter from the tenant. It has been assumed that the rate of
inflation is 6% per annum and the operating expenses have to be adjusted using the inflation rate
to calculate the cash inflows and cash outflows from the property. The property insurance is
expected to be $15,000 per annum along with property tax of $12,000 per annum. Both these
expenses are fixed and will remain so over the course of the next five years, i.e. till the time
investor is expected to hold the property before reselling it. As per market information it is also

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INVESTMENT ANALYSIS
expected that the property will have a terminal cap rate of 12% to calculate the resale value at the
end of five years.
The market analysis of the property situated at 222, Margaret Street is conducted below
using the following data table about the property (Firer and Gilbert, 2018).
Data
Property 222 MARGARET STREET, BRISBANE CITY,
QLD 4000
Address of the property 222 MARGARET STREET, BRISBANE CITY,
QLD 4000
Queensland
Type of property Multi-cultural central shopping area
Property area in square meter : 500 Square meter
Property cost $970,000
Number of years for the analysis 5
Rate of inflation 6%
Expenses expected to be reimbursed

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INVESTMENT ANALYSIS
Maintenance $4.00 Per square meter
Property tax $4,000 per yr.
Property Insurance $4,500.00 per yr.
Utilities $12.00 Per square meter
Administrative expenses $15.00 Per square meter
Expenses (It is not to be reimbursed)
Management expenses 4% of Annual gross rent
Terms and conditions
Market Rent $600.00 Per square meter
Capital improvement expenses $10.00 Per square meter
Tenancy period 5 years
Assumptions for resale at the end of year 5
Cap rate applicable for terminal value 18%
Commission on resale 8%
Market rate of interest (to be used as cost 12.00%

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INVESTMENT ANALYSIS
of capital)
In case of the above property it is expected that the owner of the property would be able to
charge an annual rent of $600 per square from the tenant. The total area of the property is 500
square meter. The rate of inflation is 6% per annum and will affect both rent and operating
expenses in relation to the property. As per market analysis it is estimated that the property
would attract an annual property tax of $4000. In addition it is also estimated that the property
insurance would be $4500 per annum and both these expenses are fixed. The terminal cap rate to
calculate resale value of the property is estimated to be 18% at the end of 5th year. The above
information are crucial in determination of the return capability of these two properties to take an
appropriate decision to select the best property for investment.
Investment analysis:
A detailed investment analysis of the two selected properties are provided below by calculating
the expected net present value of the two properties by using the available information about the
two properties in the market along with necessary assumptions. The market information about
the two properties are given in table 1 (for property 1) and table 2 (for property 2). These data
have been used to conduct the investment analysis of these two properties here (Inward
investment, 2017).
Net present value of 4503/71 Eagle Street, Brisbane City QLD 4000
Year Annual net Present value Present Value of

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INVESTMENT ANALYSIS
cash inflow factor @12% pa Cash Flow @ 12% pa
1 $3,419,875 $0.893 3,053,
459.82
2 $3,625,068 $0.797 2,889,
881.62
3 $3,842,572 $0.712 2,735,
066.53
4 $4,073,126 $0.636 2,588,
545.11
5 $4,317,513 $0.567 2,449,
873.05
Total Cash Flow $19,278,153 13,716,
826.13
Property Resale @ Cap Rate $35,979,278.2
8
Less Commission on resale $1,798,964
Net Resale Cash Flow $34,180,314 $0.567 19,394,

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INVESTMENT ANALYSIS
828.31
Gross cash inflow from the property (Present value) 33,111,65
4.43
Gross cash inflow from the
property (Present value)
33,111,65
4.43
Less: Cost of acquisition $28,000,000
Net present value (NPV) 5,111,
654.43
Working notes:
Revenue:
Year Year 1 Year 2 Year 3 Year 4 Year 5
Commercial rent $3,600,000 $3,816,000 $4,044,960 $4,287,6
58
$4,544,917
Less Loss of rent $0 $0 $0 $0 $0

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INVESTMENT ANALYSIS
Gross Commercial rent $3,600,000 $3,816,000 $4,044,960 $4,287,6
58
$4,544,917
Revenue from
reimbursement
$75,000 $77,880 $80,933 $84,169 $87,599
Total Potential Gross
Revenue
$3,675,000 $3,893,880 $4,125,893 $4,371,8
26
$4,632,516
Leasing and Capital
Costs
Tenant Improvements $125.00 $132.50 $140.45 $148.88 $157.81
Total Potential Net
Cash Flow
$3,674,875 $3,893,748 $4,125,752 $4,371,6
77
$4,632,358
Expenses:
Years Year 1 Year 2 Year 3 Year 4 Year 5
Expenses to be reimbursed
Maintenance $6,000 $6,360 $6,742 $7,146 $7,575
Property tax $12,000 $12,000 $12,000 $12,000 $12,000
Property Insurance $15,000 $15,000 $15,000 $15,000 $15,000

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INVESTMENT ANALYSIS
Utilities $18,000 $19,080 $20,225 $21,438 $22,725
Administrative expenses $24,000 $25,440 $26,966 $28,584 $30,299
Expenses to be reimbursed by the
tenant
$75,000 $77,880 $80,933 $84,169 $87,599
Non-reimbursable Expenses
Property management fees $180,00
0
$190,80
0
$202,24
8
$214,38
3
$227,24
6
Discounted cash inflows from the property over the five years period:
Particulars Year 1 Year 2 Year 3 Year 4 Year 5
Revenue from rent
Rent from tenants $3,600,000 $3,816,000 $4,044,960 $4,287,658 $4,544,917
Less: Absorption &
Turnover Vacancy
loss
$0 $0 $0 $0 $0