extract from study guide:
“This question involves the valuation of a small investment property. You are provided with all necessary details, such as property size, land size, photos and so on. You are also provided with comparable sales. Your task is to value the property as requested by the client, and produce a short report which includes some investment analysis. The property will be an actual property situated in Adelaide and students will be encouraged to make an informal inspection.
In particular, you will estimate the value of the property using a yield estimate, but you must properly consider the circumstances of sale for each sale property to determine if equivalent yield analysis is needed. Also, you will need to consider if the subject property can be valued using a simple capitalisation rate method, or if you are required to make adjustments for non-market rentals. You are also required to produce a 5 year cash flow, in excel, to estimate the investment value of the property. For the investment analysis you need to include the expected acquisition and disposal costs as well as any expected growth. In other words, you will arrive at two figures, one as a market valuation (based upon the market yield) and the other will be a figure which the investor will need to buy at, or less than, in order to achieve the desired rate of return.
Much of this assignment is based upon your ability to understand and apply the skills required in using excel. In addition to the evidence of excel skills, you will be expected to demonstrate your clear understanding of many financial terms and to be able to discuss them in very convincing but simple terms.”
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