Managing Your Investment Property

Background of project

Discuss about the Managing Your Investment Property.

The project is related to property investment planning for the purpose of long term investment. Property investment is one of the major decisions taken by an individual to earn maximum future benefit.  The proposed area mentioned in the project is Newcastle in New South Wales. The project is initially at a planning stage. Suggestion related to the long term benefit of the project to the investor is mentioned in the report. It is essential to advise the future benefit of the property in order to manage it as per the current resources. There are multiple guidelines to be followed to achieve the prospective result. The project suggests the best utilization of the property under the current market situation. It makes certain suggestions related to the future benefit of the property.

The project is related to the property investment made by the investor at Newcastle in New South Wales in Australia. It is the seventh largest city which is 160 km away from Sydney. The area is located in the center of the Hunter Region and has a beautiful coastline and beaches.   The area is connected properly and has modern facilities. It is easily accessible by air and is connected through local coach services. Its close proximity to Sydney makes it a weekend getaway. There is a growth in the property investments in the city due to advancement in opportunities.  The property has ample of opportunities for future advancements. The project has assembled the entire requirement for future management of property.

The project will create long term opportunities for the investors as the recent data has shown a rise in the property rates at Newcastle. The investment at the project would finally benefit the investor if he chooses to rent out the property. The net present value is positive. It shows that the project will benefit the investor in coming 10 years.

Property acquisition and disposal is the most important investment decision in an individual’s life. It is highly recommended to make a tailor made property decision as it serves the requirements of the individual. The investment decisions are based on capital with the investors. The investor is looking for a long term investment for a period of 10 years (Never, N., Isaac, D. and Daley, M., 2014). The investment is considered to be positive on the basis of current market trends. There is an expected growth of 5% in the property rate at Newcastle due to abundantgrowing opportunities. It is safe to invest in the property to earn a long term capital gain. The investor has accumulated 30% of investments from the outsiders. It is suggested to the investor to seek advisory from the solicitor before making an investment decision. Pre-Contractual time period should be used efficiently to evaluate the property before making the final decision. Financial feasibility is important to be assessed while coordinating with the property investment (Grant, 2016). Investor is acquiring an old property due to the less risk and existing cash flow benefit associated with the project. It helps in mitigating the construction and planning risk with a new project (Bozorgi, 2015).

Property acquisition or disposal

The cost of the given property at Newcastle in New South Wales Australia is approximately $950000.00. It is necessary to evaluate the site which is to be purchased for investments. Zoning classification is necessary to access the information related to the area, real estate property description, car parking area etc. Conceptual plan is important to be developed by the investor to buy the property until and unless the buyer is confident about the investment. The site has a good re-sale and rental value. It will help investor to meet the future contingencies. It is the safest investment on the basis of periodical benefit. In the current project the Internal Rate of Return is 16.5% whereas the required rate of return is 10.3%. The property will be a wise investment in terms of long term return. There is an expected hike of 10% in the coming years. The property is already constructed which has reduced the cost marginally. The expected return on capital is estimated to be 1.89% and the weighted average cost on the capital is 2.34 %( Mishan, 2015).

The final stage involves the basic terms of the contract. It includes the important clause related to the address, purchase price, settlement price, and any special condition which is attached to property. At this stage the investor has to make all the settlement decision regarding the property after negotiating it with the seller. Entire information related to the property is mentioned clearly in the final document. The buyer has to conduct due diligence to complete the final decision. It is essential   to conduct a background check to avoid the future inconsistencies.  Permits and licenses need to be checked before making any advancement. The investor is recommended to conduct the requisite backdrop check before moving further. The final stage is the contract of sale. The legal document should consist of all the information related to the property. Completion date is the date where the property is actually transferred from seller to buyer. It is the date which is specified in the sale document. There are various formalities which are mandatory to avoid the future risk. Completion date is important to manage future Insurance, legal liabilities, workplace health and safety, responsibility for cost of services, property management notification and transfer documents confirmation. The current payback period of the project is an essential tool to understand the value one will retrieve after the period of 10 years. The property is located at the prime location and while looking at the current trends it is recommended to acquire the property for the prime motive of investment (Ohman,Söderberg, and Westerdahl, 2013).

Property management

It is an independent project where the seller is privately purchasing the property for the purpose of long term benefit. For the purpose of disposal the seller has to evaluate the benefits at the time of resale. Private treaty is an efficient and simple way to dispose off property by putting an advertisement on the newspaper. The seller has a variety of options which will help him to avail maximum benefit out of the current property. There is a prospective growth of 10% in the property rates in the coming year. If the investors hold the property for the period of 2-3 years it will benefit him in terms of future monetary benefit. However in case of property disposal the high yield property can be sold out very easily as compared to low yield property. The current government policies are focusing on equalizing the cost of registration in between the seller and the buyer. This would help in easy disposal of property in terms of realizing immediate benefit.

Here, the investor has planned to acquire property for the purpose of continuous future benefit. The project is believed to be a good investment in term of long term growth.

Property management is related to the management of the commercial, industrial and residential property which includes the use, and the disposal of the acquired property.  Various systems have helped in managing the property’s life cycle which is important to take majority of decisions. Real estate involves a large number of duties which can only be accessed in terms of the human efforts which are attached to the property. The professional aim behind the property is to utilize it as per the requirements and current market trends. The importance of property management has increased recently due to economic recession. It is advised to manage the property carefully to avoid the deterioration of property. The goal of property management is to retrieve the maximum benefit of the investment. The right to hold a property is defined by the contractual agreement.  The current property is held for the investment purpose. The rental cost at Newcastle is very high. It will give a high economic yield if sold at a later date looking at the present scenario (Barnes and Doidge, 2010). The management of property is a combination of blend of good communication, negotiation, experience and judgmental skills. The decision related to property management resides with the owner. Thecurrent property rates are already very high.  Renting out of the property will ultimately benefit the owner. Continuous review of the acquired property is the part of the wise investment decision. A regular assessment of the locality is essential to estimate the value of the property. All the decisions related to the property are subject to the market condition.The average rental rate at Newcastle is $450 per week. It will provide a regular income to the owner (Australian Property Management,2016).

Property management involves decisions related to strategic disposal of the property as per the individual requirements. The current market yield of the acquired property is very high.  The owner can increase the rental value which will provide the benefit in the coming 5 years. The property held by the investor is valuable in terms of the future value. Growth is an important factor to be considered while considering the investment decision. The current investment is the strategic investment in the view of future growth(Australian Property Management,2016).

It is highly recommended to look after the regular maintenance of the property which is governed by the owner. The projected cost of repairing and maintenance will put the burden on the operating cost. The amount of extra cost will be acquired from the tenants by adding the amount on the total rent. The operating budget will help in managing the current budget by including the current financial plan. The property has a long term benefit which is essentially to be considered while making the purchase choices. The net present value of the project is positive which depicts a positive inflow in the coming year. Market may see a considerable growth in the requisite property (Gatti, 2013).

Preparation of the capital budget helps in analyzing the situation over the period of 10 years. It considers entire complex situations need to be considered while making the budget. The budgeting is an essential tool recommended to measure the present value. It includes all the expenses which has incurred in the past year. It is an essential point need to be considered while managing the property.

Risk management is an important characteristic while managing the property. It is essential for the owner to cover all the risk against the associated property. The current project investment required a definite investment in terms of project development. Re-insurance is important to be considered while evaluating the risks associated with the property. It is the part of the property management on the basis of the long term benefit. The property is considered to provide a long term benefit to the investor if being managed efficiently. Goal setting should be given equal importance while setting the objectives related to the project. Here the sole motive of the project is the long term investment to derive the result in the coming 5 years by establishing a comprehensive procedure. Managing a real estate property requires an integrated approach which can only be handled with a positive outlook. It involves safe and secured operations of the asset while considering the primary objective of the project. Here the motive of the owner is long term benefit by disbursing it at a future date. Facility management is important to be considered while managing the utilization of the property.  The impact of the global competition and a hike in the value of property has affected the price of the requisite property. Facility management helps in managing the various principles relating to the real estate. Property management is essential for the appreciation in the value of the investment. Moreover it helps in strategic management of the issues related to the property.

The current project is believed to provide IRR of 16% approx. It has availed various segments for the owner regarding the current property management. The anticipated risk associated with the project is due to the poor budgeting technique. The project will return 100% result after considering all the factors (Gordon,2015).

Property occupation is related to the relationship between the three parties (i.e. owner, tenant and the agent). The current project is acquired for the purpose of letting it out. The owner wants to rent out the property for the purpose of procuring profit. In the given property the user has two options. Firstly he has an option to let out the property or to sell the property as per the market condition. An analytical overview for the next 5 year profit is required to calculate the total amount of yield from the given project. As per the present situation the property is believed to give a regular income if being let out. Moreover letting out of the property is the most secured and regular source of income compared with the other sources. The annual rental rate is believed to be $94656.00 which is adjusted according to the inflation rate. Whereas the current market trend shows that there can be a rise in the property rate in the coming year. If the owner decides to sell the property it will incur a loss at a current stage (Epstein,et al,2010).

The right related to the tenancy choice resides with the owner. He has options to consider the property depending upon the current market situation. In case of letting out of the property, owner has to appoint an agent to take care of the rental deals as per the legal procedure. It is controlled by the tenancy agreement. All the provisions related to the contract are mentioned in the deed. Rent deed is drafted considering the rights and liabilities as discussed in between the owner and the tenant. The average rental rates are $450 per week. The deed should impose the rights and responsibility while demarking the rights on the property. The agreement should comprise all the relevant facts pertaining to requirement as mentioned in the tenancy act. The property agent has to take majority of decisions till the property is allocated to the tenant. The deal related to the project is carried by agent who is hired by the owner (Vaughan, 2012).The agent needs to apply to the municipal corporation for accomplishment for accomplishing the deal of the project. A managing agent has a responsibility to include all the required points by adding the necessities (finding suitable tenant, ensuring the tenancy agreement is correctly completed and signed, lodging the rental bond, conducting property insurance etc.) The deed consists of all the clauses related to the future disputes in between the owner and the tenant. The volumetric rights need to be specified in the deed for defining the rights and responsibilities of the tenant. It defines all the accessible rights given to the tenant by the owner mentioned in the contract.

The relationship in between the tenant and the landlord is difficult to be managed. It is recommended to carry out the responsibility in an efficient manner to remove the hurdles in between them. The methods to resolve the future dispute is recommended to be mentioned in the contract. All the future disputes are dealt efficiently with a correct approach. It is essential to choose a correct tenant and an appropriate agent to avoid the future dispute which may arise in between the tenant and the owner. It is recommended that the owner makes a correct choice regarding the tenant. Future of the property depends upon the choice of tenant. It is recommended that an agent has to find an appropriate tenant depending upon the owner choice. It is the responsibility of the tenant to take care of the requisite property as per the deal between the tenant and the owner. It is the duty of the owner to choose the property as per his choice. It is recommended to check the current requirements related to the law enforcement. It is necessary to be mentioned that the tenant takes considerable interest in the property to meet the current requirements (Porter and Prenzler, 2012).

The tenancy deed includes all the valid points which bind the relationship I between the tenant and the owner. All the points are necessary to be discussed in advance before making an inference. The right related to exclusive possession is depicted through the case law of Radiach v Smith which says that the lease confers the rights related to the general control( Mangioni,2015).

It is recommended to renew the tenancy deed from the period of 6 months to one year depending upon the previous relationship. Prior notice related to the property vacation is necessary to be given. The owner and the tenant are obliged to follow their duty as per the clauses which are mentioned in the deed (Residential Tenancies Act 2010 No 42,2016).

Property maintenance is an essential part while considering the future aspect. The property will only yield considerably well if it is being utilized well by the user. It is recommended to choose a maintenance strategy to develop the current property which is being let out to the tenant. Preventive maintenance is the most appropriate technique which is important to be used to avoid the problem which may arise in future. It contains both the predictable and variable components. It is a cost effective technique which helps in managing the future costing. The right to maintain the property resides with the owner. It is his duty to manage the property to provide the required benefit to the tenant. Decision related to the property investment depends upon the type of maintenance which is recommended by the owner (Renting a home, 2016). Tendering is the most effective tool which can be used by the owner which helps in seeking a regular maintenance of the property. The team keeps a timely check over the property which helps in retrieving the maximum result.

Conclusions

The report is related to the property acquisition and disposal. The property is purchased for the benefit of the long term investment. The current market condition shows a considerable hike in the property prices due to a rise in the property rate at Newcastle. The owner has an option either to let out the property or to sell it. The best option with the owner is to let out the property because the price of the property is anticipated to rise looking at the current market scenario. Renting out a property is a better option for the owner as there is a growth of 16.55% in the IRR. The property is being let out at $94656.00 which will provide a regular income to the owner. The project has a positive cash flow. Hence it is not advised to sell the property at the present situation because the market may see a considerable growth at future date. The payback period of the project at the 10^th year is positive. Hence it is recommended to hold the property for at least a period of 10 years.

The current legal cost is very high which may impose difficulty on the owner. The maintenance cost has to be carried by the owner. It is recommended that the owner should not sell the property as it might affect the current cash flow. The project is expected to give a positive yield in the coming years. It is estimated that the rental charges of the house will increase as per the current market conditions. There is a shortage of houses in Australia as per the current study. Renting out of property for the future aspect will benefit the owner. The property is located at a prime area in New South Wales. The current project has an ample of potential in terms of growth. The maintenance cost of the property is high which has imposed difficulty on owner. It is suggested to tender out the property for maintenance. Investor is however suggested to hold the property for a long tenure rather than selling it out as it may affect the current decision.

References

Australian Property Management,(2016) (Online).Available at: https://www.auspm.com/ (Accessed on: 20/10/16)

Barnes,R. and  Doidge,G.(2010). Managing Your Investment Property: The Essential Guide to Property Management in Australia and New Zealand. John Wiley & Sons

Bozorgi, A., 2015. Integrating value and uncertainty in the energy retrofit analysis in real estate investment—next generation of energy efficiency assessment tools. Energy Efficiency, 8(5), pp.1015-1034.

Enever, N., Isaac, D. and Daley, M., 2014. The valuation of property investments. Taylor & Francis.

Epstein,B et al.(2010) . WILEY Interpretation and Application of International Financial Reporting Standards 2010. John Wiley & Sons

Gatti, S., 2013. Project finance in theory and practice: designing, structuring, and financing private and public projects. Academic Press.

Gordon,J.(2015). Newcastle property prices outstripping capital cities.(Online).Available at: https://www.theherald.com.au/story/3019147/newcastle-property-prices-outstripping-capital-cities/ (Accessed on: 20/10/16)

Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.

Mangioni,V.(2015). Land Tax in Australia: Fiscal Reform of Sub-national Government. Routledge

Mishan, E.J., 2015. Elements of Cost-Benefit Analysis (Routledge Revivals). Routledge.

Ohman, P., Söderberg, B. and Westerdahl, S., 2013. Property investor behaviour: qualitative analysis of a very large transaction. Journal of Property Investment & Finance, 31(6), pp.522-544.

Porter,L. and  Prenzler,T.(2012). Police Integrity Management in Australia: Global Lessons for Combating Police Misconduct. CRC Press

Renting a home ,(2016). .(Online).Available at: https://www.fairtrading.nsw.gov.au/ftw/Tenants_and_home_owners/Renting_a_home.page (Accessed on: 20/10/16)

Residential Tenancies Act 2010 No 42,(2016) (Online).Available at: https://www.legislation.nsw.gov.au/#/view/act/2010/42 (Accessed on: 20/10/16)

The Residential Tenancies Act,(2016). .(Online).Available at: https://www.tenants.org.au/factsheet-01-residential-tenancies-act (Accessed on: 20/10/16)

Vaughan,C.(2012). Buying Property in Australia: A Guide for Non-Residents: A Guide for Non-Residents. Xlibris Corporation