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Real Estate and Shares Investment Decision Analysis
This paper will indicate an investment analysis proposal over a 25 years period. A long-term investment decision analysis is also supported. Clear descriptive data analysis on real estate as well as share will be evident in the paper.
Task 1A: Screenshot of the Property for Sale
Map of the Area
Justification of the Property
The following are the reasons why I choose to invest in the property above:
- The property is close to an area that if developing, hence it is possible that the property security is in order, my family in the future will not have security problem
- Secondly, the price of the property is within my budget, a reason why I am ready to invest in the property
- Lastly, the price of the property is highly appreciating, it is possible that the property as indicated in the sale history of other projects in the area will fetch a better price in the future if I may need to sale it.
Sales History Screenshot
Growth Rate of Area 2006-2016 (Sebastopol)
Task 1B Choose The Shares
The companies that are choosen are Commonwealth Bank of Australia and Woolsworths Limited
Commonwealth Bank of Australia purchase of $200,000 at 73.12 was purchase on the stated date and time.
Woolsworths Limited purchase of $200,000 at 73.12 was purchase on the stated date and time.
10 years Chart of the Shares of Commonwealth Bank of Australia
10 years Chart of the Shares of Woolsworths Limited
Task 2A – Calculating the Costs of Purchasing Real Estate (SR)
It is considered that the legal fees of such an investment in Australia is around $200,000 to $300,000 (https://www.realestate.com.au/advice/hidden-costs-buying-home/)
Task 2B – Calculating the Costs of Purchasing Shares (SR)
|Company Name||Purchase Price per share||Number of Shares Purchased||Brokerage fees||Total Cost|
|Financial Company||Commonwealth Bank of Australia||73.12||2735.23||2850||202850|
Task 3 – Financing the Investment (SR)
It is considered that the primary period for the payment of the loan is 25 years.
Task 3a – Calculate your total costs for this loan over the first 12 month period
From the above analysis, the monthly repayments for the 25 years period is $1,798. The fees that are likely related to the above loan is legal fees.
The amount payable in the first year is 12*1,798= $21,576
The balance of the loan after the first year is 350,000 (loan) less 21, 276 = $328, 424
Task 3b – Calculate your total costs for this loan (SNR).
Cost after the first 10 years is $21,576*10 is equal to $215,760.
The amount owing on the loan on the first 10 years are 350,000-215,760 is equal to $134,240
The total over 25 years paid after 2 weeks is 350,000+ 188, 993 = 538, 993 see image below:
PART 4 – THE FUTURE
Real Estate Option
|less Cost of selling||$10,350|
|Adjusted sale price||$989,650|
|add Cost of purchase and ownership||$13,413|
|Adjusted purchase price of asset||$463,413|
This means that an investment on the above will have a profit of $526,237
Shares Option (Commonwealth Bank of Australia)
It is evident that a profit of $47,217.70 is expected.
Shares Option (Woolworths Limited)
A profit of $162, 390 is also anticipated on the sales of this shares after 10 years.
A total of 209, 608. 03 in profit is expected when the shares are sold after 10 years (2026)
Based on the calculations as indicated by the model, it is clear that the real estate option is the best to go with because it has a high capital gain of $526,237 as compared to that of stock that has only a capital gain of $209, 608. 03. The investor should therefore go with real estate gain.
The strengths of the Model are:
It offers a reasonable analysis of the real estate as well as share over time, for example it can calculate fortnight, weeks and months as well as years
It supports varied situations such as financial crisis among other factors that affects long-term investment
It cannot be used on limited short-term investment such as 1 years and less
The model was reasonable because it was able to offer the needed answer to the investment analysis that was on board. It was also able to offer answers on the time to sell the real estate or share when needed and the time a profit or gain can be obtained. The model should be adopted in the future.
Benassy, J.P., 2014. Macroeconomics: an introduction to the non-Walrasian approach. Academic Press.
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