Group Valuation - Assignment Example

Group valuation Assignment Executive summary Over time now, Pennant Hills demography has changed leading to need for more housing considerations fortenants who wish to rent out rather than an apartment. It is in this view; we have taken an advisory for implementation from the local real estate agency-Pennant Estates Ltd-to build a granny flat owing to our small family. The granny flat will be a two bed roomed with a sitting room, a chimney-kitchen, and sizeable partitioned wash rooms given the space for a duo garage won’t accommodate an extension of same.

The costs of building comparable with the weekly returns of renting out our current house are welcome (realestate.com.au, 2015). Costs of constructionThe cost of construction is estimated at $69,567.00 with advertisements costs of $3,456 and maintenance costs and utilities will be estimated at $16,874.With an estimation of $ 89,897.00 as our initial cost, an estimated weekly tune of $1,090 as compared to having the huge lot with garage not maximizing open opportunities. This will include financing of a loan of $80,000.

00 from the local bank with an interest rate of 9.8% P.A and own savings of $9,897.00.We shall assume a rate of return of 10% within 3 years for the project. My wife is in agreement with moving out to the granny flat upon finishing so as to rent out the current house of which with a short period, our cost incurrence former could have made a pay back. Return on InvestmentPennant Hill Family Initial Cost USD 89,897.00 USD 89,897.00 USD 89,897.00 Monthly cost USD 1,092.00 USD 1,120.

00 USD 1,230.00 Annual Rate of Return USD 13,104.00 USD 13,440.00 USD 14,760.00 Bank loan cost USD 8,809.91 USD 8,809.91 USD 8,809.91 Return on Investment0.490.530.68Percentage48.74%52.56%67.54% Net Present Value- t=0,1,2 r=10%Co=89897.00Ct1=13,104Ct2=13,440Ct3=14,760=13104/ (1.1)0-89897=-76,793.00=13440/1.11-89897=-77,678.82=14760/1.212-89897= -77,698.65It shows a consistent flow of income to mean the project is viable for implementation.RisksWe certain to counter possible risks such as lack of quick tenancy, slow county clearance and approvals among others.

Reference realestate.com.au, (2015). Real Estate & Property For Rent in Pennant Hills, NSW 2120 (Page 1) - realestate.com.au. [online] Available at: http://www.realestate.com.au/rent/in-pennant+hills%2c+nsw+2120/list-1?source=location-search [Accessed 2 May 2015].