Write your written answers or formulas in the cells coloured yellow. Marking columns

Please make all results linked by formulas. Marks will be allocated for this. For example, if the marker changes one of the 3 properties’ prices that are included Mark Comment

in your average in Question 1b, this should automatically change your numerical answers in Questions 1f and 2b.

Please do not insert extra lines or columns into this spreadsheet since some of the marking is designed to be automated with formulas.

For example, the loan outstanding amount at time zero in question 2b in Cell A121 should be equal to 80% of the

value of your house given in question 1b in Cell F36. Our marking formulas will check this and other things and deduct marks if it’s wrong.

If you insert rows and columns so that these cells A121 and F36 no longer contain the answers to those questions, your mark may suffer.

Find an Australian house or apartment that you would like to research.

From here on this will be referred to as a house or property or home regardless of whether it is a house or apartment.

The house can be anywhere in Australia so long as you can find enough details about the home and the other variables discussed in the below questions.

Question 1 (10 marks total): This question is focused on valuing your house.

Question 1a (1 mark): State the house’s full address and copy a small picture of the house.

Enter the full address here

Insert small picture of house here

Question 1b (1 mark): Estimate the home’s value based on an average of no more than 3 similar properties that have sold within the last year or two.

Using the table below, set out the details of yoru chosen property first and the other comparable properties below.

If you can’t find the floor space or land area, perhaps the number of garage spaces is available instead. Adjust the heading as necessary.

The first row of the table should include the details of the property you’re valuing which was stated in the previous question.

The other rows should show the details of the other similar properties.

Details of Your Chosen House and 3 Comparable Houses:

Address Bedrooms Bathrooms Floor or land space (m^2) Last sale date Last sale price Html link or reference to source

Insert address of your chosen house from question 1

Insert address of comparable house 1

Insert address of comparable house 2

Insert address of comparable house 3

Average comparable properties’ last sale prices (exclude your chosen house from question 1) Enter a formula for the comparable properties’ average sale price here

Question 1c (2 marks): Estimate the gross annual rental revenue from leasing this home if you were the landlord and chose to rent it out to another person.

You should find similar rental properties and take an average of their actual or advertised rents.

The gross rental revenue ignores costs of renting. Ignore the intra-year time value of money effect.

So for example, even though rent might actually be $3,000 paid monthly, assume that it is 36,000 (=12 * 3,000) paid annually at the end of the year. Reference your sources.

Your comparable houses for rent do not have to be the same as the comparable houses used to estimate price in the previous question.

Details of Comparable House Rents:

Address Bedrooms Bathrooms Floor or land space (m^2) Last date advertised for rent Gross rent per week Html link or reference to source

Insert address of comparable house 1

Insert address of comparable house 2

Insert address of comparable house 3

Average comparable property gross rent per week Enter a formula for the comparable properties’ average gross rent per week here

Question 1d (2 marks): Estimate the annual rental costs of leasing your home if you were the landlord and chose to rent it out to another person.

Similarly to above, ignore the intra-year time value of money effect. Reference your sources.

Since we are trying to value the house asset, do not include the costs of debt (interest expense) or costs of equity.

Otherwise, your estimated house value will be zero since all asset cash flows are owed to debt and equity holders.

Note that not all of the below expenses (for example gas, water and electricity) have to be paid by the landlord and this can differ by state.

For example, Strata bills are a cost of owning an apartment so should be included as a cost but land tax usually isn’t and should be zero. Vice versa for free-standing homes.

Dollar cost pa Html link or reference to source

Maintenance

Real estate agent management fee

Real estate agent advertising fee

Vacancy (opportunity cost)

Strata bill

Land tax

Council rates

Water bill

Gas bill

Electricity bill

Other cost that you can insert here

Total dollar cost per annum Enter a formula for your total dollar costs pa here

Question 1e (3 marks): Estimate the annual growth rate of rents and explain your answer.

Reference your sources which may include data from the Australian Bureau of Statistics (ABS) or the Reserve Bank of Australia (RBA).

Explain your argument and process for

estimating the annual growth rate of rents.

Write in a few short grammatically correct sentences.

If your answer is too long and overlaps

the marking column, use word wrap or write one sentence per cell

like in this document.

Enter your growth rate of rents pa here

Question 1f (1 marks): Assuming that your property lasts forever, use the ‘perpetuity with growth’ formula to find the

implied total required return per annum (pa) of the house asset based on the estimated house price, net rent pa and rental growth pa.

Note that net rent equals gross rental revenue less rental costs. Be sure that your formula is linked to the results from the earlier questions.

For example, changes to the answer in question 1e should affect your answer to this question.

Assume that the rental revenue and costs found above are expected to be paid and spent in one year from now, and then they’ll both grow by at the rate found above.

Enter a formula for your house’s estimated total return pa here, based on your answers above

Question 2 (5 marks total): This question is about financing the purchase of your house above.

Question 2a (1 mark): Find the best (lowest rate) Australian home loan comparison rate that you can for a

fully amortising 25 year investor (not owner-occupier) loan with monthly payments in arrears, with an LVR of 80%.

Your initial loan size should equal the estimated house price found in the previous question (1b) multiplied by 80%.

Enter the lender name and loan product name here

Enter a link or reference to the source

Enter your home loan comparison rate pa here

Question 2b (4 marks): Prepare a loan amortisiation schedule by filling in the table below.

The loan must reflect the details of the loan you referenced in the previous question.

Include a graph of loan outstandings against time, measured in years, not months.

You may want to use the 2 extra columns to the right of the table to feed as input into the graph.

Insert graph here

Time (month) Loan outstanding Interest due Payment due Principal repaid Extra column for graph Extra column for graph

0 NA NA NA

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