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NOTE ON

REAL ESTATE
INVESTMENT
SYNDICATE 2

SYNDICATE
2

Rozean Wijaya

- 29115684

Raditya Dwi A

- 29115690

Randy

- 29115685

Nadya Rizkita

- 29115630

Wulan C. Lestari

- 29115628

Rais Kandar

- 29115663

M Iqbal F Syamlan

- 29115539

OUR BEST TEAM

01

T YPES OF REAL ESTATE

02

REAL ESTATE PROFITABILITY

03

REAL ESTATE VALUATION

04

REAL ESTATE IRR & NPV

CONTENTS

01

TYPES
OF
REAL
ESTATE

Real estate Investing, even on a



very small scale, remains a tried

and true means of building an

individuals cash flow and wealth

- ROBERT KIYOSAKI-

TYPES OF
REAL ESTATE

RESIDENTIAL

COMMERCIAL

INDUSTRIAL

INFRASTRUCTURE

RESIDENTIAL
REAL ESTATE IS
FAMILIAR TO MOST
ADULTS BECAUSE AVERAGE
PEOPLE WILL OWN AT LEAST
ONE HOME OVER THE COURSE
OF THEIR LIFETIME

RESIDENTIAL

PRICE ELEMENTS
FOR RESIDENTIAL
- Quality and condition of the building
- Amenities
- Proximity to malls, schools, transportation
arteries
- Safety of the neighborhood
- Condition of the other properties in the
neighborhood
- The trendiness of the neighborhood
- Shortage or surplus of similar properties
- Mortgage rates

PROPERTIES
DESIGN TO HOUSE A
BUSINESS
- PRIMARILY : OFFICES & STORE
- BOUGHT WITH INVESTMENT MINDSET
- VALUED BASED UPON CAP RATES

COMMERCIAL

PRICE ELEMENTS

FOR COMMERCIAL
- Foot traffic in front of the location
- Proximity to major transportation arteries
- Quality of the other business nearby
- Condition and styling of the building
- Parking available
- Prestige level of building

- CONSISTS OF FACTORIES
& OT H E R ( O I L TA N K
FARMS)

INDUSTRIAL

- DIFFERS FROM THE OTHER


2 REAL ESTATE CLASSES
ABOVE

- CONSISTS OF UTILITIES, TOLL


ROADS, AIRPORTS, ETC
- NOT VERY PREVALENT UNTIL
RECENT YEARS
- FOUND TO BE STABLE &
PROFITABLE INVESTMENT
INFRASTRUCTURE

02

REAL
ESTATE
PROFITABILITY

SOURCE OF
PROFITABILITIES

Property value
appreciation
Cash Flow
Paying down debts (debt
depreciation)

ANNUAL
PROFIT

Property Value
$100,000
Mortgage (25 years amortization)
$80,000
Equity
$ 20,000

ANNUAL
PROFIT

Cash Flow
Mortgage Amortization
Appreciation

$1,000
$2,000
$3,000

TOTAL

$6,000

NUMERIC
EXAMPLES

Return On Assets (ROA)


(modest)
Return On Equity (ROE)
(excellent)

6%
30%

Typical leverage uses ranges


between 50%-70% to reduce the
debt burden & the risk of negative
cash flow in the event of rising
interes rate or unexpected
vacancy.

A regular warehouse
Cash Flow (/month)

$5,000

OR
MAXIMIZING

REAL
ESTATE
RETURN

100 personal storage areas


Cash Flow (/month for 1 area)

$200
Total Cash Flow
$20,000

OPTIMIZING
PROPERTY USE

Renovation
Changing property functions
Selling or renting the
property off by spliting it to
smaller sections

03

REAL
ESTATE
VALUATION

VALUATION METHOD
REAL ESTATE
Comparables -> Comparing with other similar properties
Cap Rates -> a discount rate determined by market, used only to a
property which generate income. Use net operating income not cashflow.
DCF -> using discount rate for cashflow each year added by terminal
value at the end of asset lifetime. Also reflect the effect of debt etc. due it
being a cashflow.
Replacement cost -> estimating the cost rebuilding the property from
scratch which can yield a higher value than the market in cases of old
building. Usually used in insurance.

CAUSE OF

REAL ESTATE
VALUE
APPRECIATE

Renovations
A disappearance of a perceive
problem in the area
A major increase of real estate
price
Transition of an area
Property converted to a more
valuable function
Increase in overall housing
demand
A considerable speculative
investment in the area
Strong political encouragement
to growth

Major transportation improvement


There have been recent increases
in labor or material cost in the
area (replacement cost)
Interest rates decrease
CAUSE OF

REAL ESTATE
VALUE
APPRECIATE

Average income increase


The area has become attractive
to a large demographic wave

04

REAL
ESTATE
IRR & NPV

Value should be described


only on a single point of
time but also the

forecasted future

return of some period

INFLOW
Revenue from operations (rents, deposits, vending, parking,
ad space, etc)
The sales of some teresterial units
Operating expenses (utilities, maintenance, insurance,
property, managers, etc)
Construction costs (consultant, plans, land, building, etc).
Marketing costs
Depreciation
Taxes
Partner (developer or joint venture) fees

OUTFLOW

The return by assuming


zero NPV
The bigger the IRR means
the required return to BEP
REAL ESTATE

the NPV is bigger, means

IRR

the project has high


return

Discounted with
investors target
minimum return
Positive NPV means
REAL ESTATE

NPV

investment exceeds
investors hurdle rate

EQUITY INVESTOR
AND DEVELOPER
Different for each project: depends on the manager
Common manager interest: net profit after tax and leverage (with
or without debt).
Equity investor contribute the majority of the funds
Developer doesnt or contribute small funds
Investor relies on the developer to make the project succeessful
that developer will be provided by incentives

CALCULATION

REAL ESTATE
Create pessimistic, most likely, and optimistic scenario
Create each scenarios IRR
Create incentive percentage level for each level of IRR for developer
Calculate the remaining cash for profit distribution for investor
Calculate the terminal value of project
Combine the terminal value and profit for investor, so that we get IRR of equity
partner

Terima
Kasih

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