The overall assignment mainly focuses on providing the relevant evaluation of a property, which could help in attaining income from development. In addition, the assignment provides relevant background related to property, which could be developed for increasing profitability after building a plot of land. Moreover, the overall funding, development undertaking, background, financial viability and ownership of the overall property are depicted in the assignment. This mainly helps in identifying the viability of the investment conducted in the property. Relevant financial calculations such as Net Present Value (NPV) and Internal Rate of Return (IRR) are mainly used in the assignment to identify the profitability, which might be obtained from the investment. Furthermore, calculations conducted in the assignment focuses on identifying the relevant profits and future incomes that might be generated from the investment. The assignment mainly focuses on developing a medium size plot into and a residential apartment, which could provide relevant income for the developer.
The property is situated in 8-14 Shutter Street Moonee Ponds, where a modern architectural Benchmark is positioned conveniently. The property many promises an astonishing view and living lifestyle, with a spacious floor plan and a compliment I’m sleeping view of thriving urban enclaves. The property provides an effective living facility for one, two and three bedrooms, which could be used by individuals in the building. With the open living spaces natural light and quality materials, the overall project provides a luxury living standard for the buyers of the apartment. The land is mainly bought at $360,000, which is planned to be one of the luxurious buildings near Moonee Ponds (Baker 2015).
The property development consists of many difficulties, which must be dealt by the developer before the commencement of the development project. Development in Australia needs adequate approval from authorised personnel, who are Responsible for both development and environmental control. The property 8-14 Shutter Street Moonee Ponds mainly consists of many development projects and rising housing apartments, which reduce the concerns related Social issues that might affect the continuation of the project. However, due to rising developments near Moonee Ponds, ecological and environmental issues could have raised from the Local authorities. Moreover, this site does not have any kind of problems, which might result in halting the project in the middle of the development. The property is clear for sale and was enlisted in one of the selling websites. Bergman (2017) mentioned that rising development project could reduce the ecological balance and hamper the environment.
The main issues that might be faced by developing the property in 8-14 Shutter Street Moonee Ponds are depicted as follows.
The main problems that might be faced while conducting the construction project in Shutter Street Moonee Ponds are from the ecological department. There are relative high construction projects conducted in the area due to the ecological benefits portrait from the site. The rising demand for housing in the area relatively grows along with the property prices and rent, which depicts the demand for rising development that is to be conducted in the area. Botha, Adendorff and Smallwood (2014) argued that rising demand for property or flat in a particular area could reduce the ecological balance and increased rigorous development Conducted only for profit.
Secondly, project performance also needs to be evaluated before the commencement of the overall development project. Identification of adequate demand needs to be evaluated, which in Identifying the future income that might be provided from the project. This evaluation of future income mainly helps in identifying the viability of the project, which is to be conducted in Shutter Street Moonee Ponds. Without the evaluation of ecological and environmental issues, relevant problems cannot be identified, which might negatively affect completion of the project. Casillas et al. (2015) mentioned that NPV and IRR method allows companies to effectively identify viability of a project while evaluating future close from the project.
The main nature of the project is to develop a vacant land into a housing building, which could be used for the rental purposes. As the project needs adequate investments of $360,000 relevant feasible studies needs to be conducted before the overall selection of the land. The land is many located in the heart of 8-14 Shutter Street Moonee Ponds, wherein few minutes train station could be accessed, from stops and bus interchanges available. This site is also close to Coffee houses, first-class restaurants and Cafes, which could be easily accessed by the residence. Moreover, there is a moon pond Central where first class education and access to a range of Higher Education are provided to the individual. The facilities provided near the property mainly indicate the overall viability and feasibility of the development project (Charney 2015).
The evaluation of above features provided from the land good mainly help in selecting the project for development purposes. After the selection of the land, relevant planning application and approvals should be conducted. In addition, land improvement, infrastructure building and service agreement need to be conducted before the commencement of the overall project. Adequate planning applications and approval need to attend the relevant authorities in Australia to start the development project. As there are no environmental, ecological and social issues attached to the development project, no problems will arise while taking approvals from relative authorities (Diamond and McQuade 2016). However, external and internal work needs to be conducted in the project effectively developing an irrelevant building on the site. External works such as roads and greenery need to be added to the development site. Furthermore, internal developments such a site works need to be conducted for developing the overall proposed residential building. After gathering all the relevant permissions from planning, acquisition, and approval could eventually help in starting the overall development project. Thus, the collection of relevant permissions could eventually help in smoothly conducting the development project without any hindrance from external forces (Evers 2013).
The project will mainly be funded with the help of equity and loan for effectively buying the relevant property and developing the overall project. The project will be completed in the life cycle, which will require different funding for the effective completion of the overall project. Furtado, Alcântara and Bezerra (2014) mentioned that development projects continuous supply of money on different stages effectively completing your project without any hindrance or halt. Furthermore, for the development project there needs to be a likely source of funding, which must support the overall project. The major Funding will mainly be acquired from loans, which could provide the overall money to buy and develop the overall project. Moreover, only 10% of the equity, funding is provided for buying the overall plot and the other 90% is mainly derived from loans. Grimes and Mitchell (2015) stated that use of loans and other forms of funding allows development companies to effectively construct a plot without any kind of delay from the low capital. Therefore, after buying the plot on loan basis the commencement of the Constructions needs to be conducted, this requires additional funds from other sources. Thus, funds need to be collected from external sources effectively completing the overall project in time.
The different stages where funds are needed for completion of the overall project are depicted as below.
Relative funding is mainly needed at this stage, as the overall land is mainly procured in the stage. The overall loan is mainly needed at this stage to buy the property in which development will be conducted. Before commencement of the overall project, relevant property needs to be bought for the completion of the building development. Therefore, adequate capital or funds are needed Support the overall business activity (Halbert, Henneberry and Mouzakis 2014).
At the time of excavation and groundbreaking, adequate capital is needed to level the overall plot for the commencement of the order project. In addition, the excavation is mainly conducted to level the overall ground, before initiating the foundation stage. This levelling the ground needs adequate money, which could be delivered from loans provided by banks (Havard 2013).
This is the critical stage where the actual foundation of the overall building is laid, which adequate funding effectively needs build the foundation. Therefore, adequate funds need to be collected from banks as loans for effectively completing the overall Foundation stage. Without the completion of the foundation stage, the overall construction of the building cannot be started (Henneberry and Parris 2013).
At the time of building floors and roof stage, adequate funds are needed to complete the different levels of floors in the building. The commencement of the building of floors and roof stage need adequate funding, as more materials are needed to complete the overall task.
The last stage where funds are needed is recovering of was installing of all the relevant features in the building. This stage requires adequate capital with all the funds needs to be gathered for completing the overall building (Hu 2013).
The figure mainly helps in identifying the overall floor plans for the proposed building, which could be used in allocating the relevant plan to the individual. Moreover, the floor plans mainly indicate the overall rooms, which need to be built in the building. In addition, the floor plans also portray the number of rooms, which will be built on the premises, which could be used for the renting purposes. The floor plans mainly indicate that 42 rooms will be constructed in the proposed building, which could help using the overall stay of the individuals (Jung and Lee 2017). Furthermore, car parking space and roof settings page are also depicted in the figure, which mainly indicates the overall facilities that will be provided to the individuals living in the building.
It identifying the overall interior designs, which will be conducted in each room of the proposed building. Interior designs are mainly prepared after evaluating all the relevant facilities that need to be provided to the individuals living in the rooms. Furthermore, all the facilities such as exterior outings, bathrooms, bedrooms, kitchen and other amenities are provided in each of the rules developed in the proposed building. Relevant features are needed in the proposed building for effectively attracting relevant individuals as a tenant. The changes required in the building are depicted in the above figure, which could help in attracting relevant individuals in the vicinity (Karadimitriou, Magalhaes and Verhage 2013).
Furthermore, the overall project mainly portrays Residential building, which needs to be constructed in 8-14 Shutter Street Moonee Ponds. In addition, there are many projects, which are being constructed in Moonee Ponds area. These existing improvements, which are being conducted in the area, do not require any kind of development of the property. Hence, the structure of the overall plot is adequate for commencing the constructions of the proposed building. Karlström et al. (2016) mentioned that use of adequate development plans allows companies effectively identify the overall cost, which will be conducted for completing the project. Therefore, it could be evaluated that there are no improvements that need to be conducted on the particular land to start the whole construction project.
Preparation of feasibility study needs to be conducted before commencement the overall development project. The development project needs to be evaluated with different types of cost that might be associated with the project. A feasibility study mainly helps in identifying the overall project viability, which could help in improving return on investment. Furthermore, relevant documents need to be obtained effectively commencing the overall development project. Without the relevant documents, no permissions will be provided and the adequate authority will not grant building approvals. Furthermore, the overall documents and building approvals need to be collected before the commencement of the development project. Levett et al. (2014) stated that without adequate approvals from Australian authorities no development projects could be started within the premises of Australia. Therefore, adequate documents and statutory building approval need to be conducted for starting the overall development project.
However, after seeing the overall development procedures conducted near Shutter Street Moonee Ponds, the use of contractual basis contractors could effectively help in developing the overall projects. The use of adequate tender documents could be conducted, which might help in completing the overall construction project within the estimated cost. The use of contractors could eventually help in reducing the overall cost and completing your project within the specified time. The overall improvements need to be conducted by completing all the physical works, which are needed for the proposed project. Martinez and Olander (2015) mentioned that use of contractual developers could eventually help in completing the overall project within the specified time and cost. On the other hand, Nazli et al. (2013) argued that without evaluating the viability of the project adequate decisions regarding the commencement of the development could not be made, which will increase the completion time of the building.
The overall completed rooms will mainly be provided to individuals that want the apartments as rent. In addition the overall building will be leased to individual, who will provide a monthly rent for the usage of overall premises. After the completion of the oral project, around 42 flats will mainly be developed, which will be used in the missing process where the occupiers will provide a monthly rent for their stay. Norris (2016) mentioned that use of rental property would eventually help in getting a fixed monthly income from the property which could be utilised in paying all the relevant loans and generating adequate profit. The use of overall rental property could eventually help double down in attaining adequate income from the endeavour. Leasing is mainly identified as the best option for the overall project, as demand for housing Complex is relatively high in the area, which could help in generating a constant income from the investment. Moreover, the occupiers being acquired on rent basis, relevant increment in rent could be attained in future when demand of the property increases in the area. This could eventually increase the future rents that might be generated from the property (Othman et al. 2014).
Lifespan of the overall completed development project is mainly estimated within 10 years after completion of development. The overall tenure mainly depicts the lifespan of the overall project development project, after which renovation need to be conducted. Before 10 years there is no Capital expenditure that will be conducted on the overall project. However, there are small expenses that need to be conducted each year for effectively maintaining the property in intact manner (Razali et al. 2017).
|
Purchase price of asset in year zero |
100% |
$ 2,500,000 |
|
Equity (opportunity cost) |
10% |
$250,000 |
|
Borrowed funds (A) (interest only loan) |
50% |
$1,250,000 |
|
Borrowed funds (B) (interest only loan) |
40% |
$1,000,000 |
|
Weighted average cost of capital (WACC) |
||
|
Risk margin on investment |
||
|
Profit margin required on investment |
8% |
|
|
Anticipated rate of change in value of asset (escalation) |
3% |
|
|
Duration of investment in years |
10 |
|
|
Anticipated sale price / residual value in final year (FV) |
$3,200,211.36 |
|
|
Legal costs |
$ 2,500.00 |
|
|
Stamp duty or other government charges |
$ 117,100.00 |
|
|
Other costs of purchase |
$ 8,006.00 |
|
|
Purchasing Expenses in year zero |
$ 127,606 |
|
|
REVENUE |
||
|
Anticipated monthly rental revenue |
$63,000.00 |
|
|
Anticipated annual revenue at 100% occupancy rate |
$ 756,000 |
|
|
Anticipated occupancy rate |
90% |
|
|
Anticipated rental revenue per annum |
$ 680,400 |
|
|
Other revenue per annum |
$ – |
|
|
Other revenue per annum |
$ – |
|
|
Total revenue per annum |
$ 680,400 |
|
|
EXPENSES (cash outflows) subject to inflation |
||
|
Body Corporate per annum |
$ 12,500 |
|
|
Rates per annum |
$ 45,000 |
|
|
Insurance per annum |
$ 35,000 |
|
|
Other expenses |
$ 12,500 |
|
|
Other expenses |
$ – |
|
|
Total Expenses per annum (year zero dollars) |
$ 105,000 |
|
|
Fixed expenses (not subject to inflation) |
||
|
Interest payments per annum |
$ 137,500 |
|
|
Other expenses not subject to inflation |
$ – |
|
|
Other expenses not subject to inflation |
$ – |
|
|
Total expenses (not subject to inflation) |
$ 137,500 |
|
|
Projected inflation rate for future expenses |
2.50% |
|
|
CALCULATION |
Return on inv |
Return on equity |
|
Return on investment |
21.90% |
|
|
NPV |
$3,599,840.80 |
$ 694,408.89 |
|
IRR |
23.69% |
24.51% |
Table 1: Depicting the financial viability of the proposed development project
(Source: As created by the author)
The evaluation of table 1 mainly helps in identifying the financial viability of the proposed project, which could help in attaining higher return from investment. In addition the overall project needs an investment of $2,500,000 for purchasing the plot in which construction will be commenced. The overall 90% of the funding is mainly is mainly conducted from debt while 10% of the funding is conducted from equity shares. Moreover the overall npv of the project is mainly at $3,599,840.80, which is relatively higher than the investment amount conducted in the development project. The IRR of the project is mainly at 23.69%, which is relatively higher than the cost of capital in completing the development project. Rose (2013) mentioned the relative use of npv method allows investors to effectively identified viability of the project, which could provide higher return from investment. On the other hand, Samsura (2013) argued that IRR method does not support time value of money, which reduces its overall viability.
After evaluating the overall cash inflow and outflow generated from the proposed project, its viability to attaining higher revenue in future is confirmed. Hence, the financial viability of the overall proposed project is identified, which help in gathering higher profit after completion of the project and forms of rent. There are many cash outflows and interest that needs to be paid, which was used in completing the overall project.
Conclusion:
After the overall evaluation of the assignment, relevant features such as financial viability, ownership development, funding procedures, development undertaking, and issues related to development identified. This overall identification of the relevant factors influencing the development of a building in Australia mainly helps in completing the overall development project. The plot used in the development process with relevant funding at adequate times to complete the whole project within the specified tenure. The viability of the power project is mainly evaluated with the help of NPV and IRR, which depicts the relevant income that will be depicted from the project. In addition, the evaluation of different ethical, environmental and social issues is not identified within the overall development project. Therefore, by using contractual basis workers overall project could be completed within the specified time and at reduced cost. The overall development when will be completed within 3 years of starting the overall project.
Furthermore, the evaluation of overall finance, social and environmental aspects mainly indicates that the overall development project 8-14 Shutter Street Moonee Ponds is viable. Furthermore, the financial status indicates that after the payments relevant income will be projected from the investment. Hence, the overall project provides an adequate income from rents, which could help in increasing the overall profit in your future. Therefore, adequate profitability would be obtained from the investments conducted in Moonee Ponds plot. Seeing the overall demand for relevant apartments, commencement of the development project could be conducted for increasing return on the investment.
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