Property Flashcards
Six factors of prime property
Location
Age and condition
Quality of tenant
The number of comparable properties available to determine the rent at rent review and for valuation purposes
Lease structure
Size
Rental yield
Rental income (net of all management expeneses) / cost of purchase (net of all purchase expenses)
Factors influencing level of rental yield
Type of property
Type of tenant
Type of lease
Prospect for rental increases
Marketability
Site value
List some Challenge of direct property investment to small companies
Size
Diversifications
Lack of marketability
Valuation
Expertise needed
four approaches to incorporate property investments
direct investment
pooled property fund
shares of property company
Listed REITs
Two main categories of property market
Commercial property
residential property
Three interrelated areas that economic influences will have an impact on property market
occupation - demand for property for occupation
development cycle - the supply of newly completed property development
investment market - supply and demand for properties as invesments
How would you calculate a value for a block of flats
using a DCF approach
departure point would be the current rental agreements in place
discount expected rental proceeds from the property
allowing explicitly for management expenses and tax
allowance for expected or agreed rental growth
expenses should be split into ongoing maintenance expenses and once-off expenses
discount rate would be calculated based on a risk-free real rate plus for facors like:
illiquidity
expected inflation
voids in rental
quality of tenant
quality of building
alternative uses
location
outline the information needed before deciding whether to invest in a particular property company’s share
NAV per share of the property company
quality of management of the company
quality of underlying properties
diversification of underlying properties
gearing of the company
liquidity of shares
history of income distribution
