PROPERTY DEVELOPMENT (BPE 34603)

Prepared By: Mr. Mat Tawi Yaacob Dr. Azlina Md. Yassin

Chapter 2
Property Development Investment

Definitions
INVESTMENT

Foregoing a Capital sum at the present time for a future income stream or benefit, known as profit or Return on Capital.

Return On Investment Measure of Return

Anticipated Income or Profit Yearly Monthly Other Time Frame

1
% of Capital Outlay
3

2
RM & Sen

Profit Index

 Capital outlay - money spent specifically to increase the value of a particular asset whether it is for repairs of that asset or otherwise. The amount used during a particular period to acquire or improve long-term assets such as property, plant or equipment.

 Measurement of return:- yearly / monthly / quarterly Example: Housing : 1990 = RM 75,000.00 1998 = RM 140,000.00 Return = RM 65,000.00 / 53.57%

Type of Profit
Income Rent / Dividen Capital appreciation Psychological income

Types of Investment
Stock and Shares Loans Bonds Savings Unit Trusts REITS Property Etc.

 Stock: A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings. There are two main types of stock: common and preferred:
Common stock usually entitles the owner to vote at shareholders' meetings and to receive dividends. Preferred stock generally does not have voting rights, but has a higher claim on assets and earnings than the common shares. For example, owners of preferred stock receive dividends before common shareholders and have priority in the event that a company goes bankrupt and is liquidated.

Investment objectives: To derive profits from whatever forms of Investment

Investment Portfolio:

A combination of Investments to achieve objectives, and diversifying investments to reduce risks and uncertainties.

Theory of Portfolio
Portfolio = Grouping of assets. Fundamental principles of portfolio = diversification. dont put all eggs in one basket Portfolio management: membina portfolio serta menjadikan ianya berkembang ($$$) untuk mencapai objektif pulangan yang ditentukan oleh pelabur

Factors To Be Considered In An Investment

Locational Factors Financial Situations Government Policies Local Economies Geographical Factors

Incentives, Control And Restrictions To Investment

For eg. institutional and economic factors play a big part in property investment activities, where their involvement is intricately linked with govt. legislations

Many incentives/ facilities exist, but there are controls and restrictions governing such investments.

Incentives, Control And Restrictions To Investment Malaysian Incentives Act 1968 Malaysian Investment Tax Allowances Malaysian Income Tax Act 1967 Malaysian Property Gains Tax Foreign Investment Guidelines (FIC) National Land Code

Incentives, Control And Restrictions To Investment State Government Policies Property Developers Project Account Scheme Control of Goods Act Control of Lending Rates Malaysian Investment Incentives Act 1968

Property Development Investment

Residential Dwellings

Property Types

Commercial & Retail Industrial Tourism & Recreational Institutions & Public Terminals

Property Classifications
Low Cost

Residential Buildings

Medium Cost

High Cost

Property Classifications
Retail

Commercial & Retail

Office & Retail Commercial Complex Hotel

Office Building
Departmental Stores

Property Classifications
Small Scale Industrial

Industrial

Medium Scale Industrial

Heavy Scale Industrial

Hi-Tech Industrial

Tourism And Recreational

Resort / Chalet Leisure Hotel / Motel Golf Condotel / Service Apartment Theme Park Leisure Centre Cinema Bowling, Snooker etc.

Institutions & Public Terminals Ports Airport Bas / Train / Taxi Terminal Government Complexes Stadiums

ASSETS
Sources of value the business owns Investment of business Three usual types of business assets: 1. Current Assets: Converted into cash within one operating cycle. 2. Fixed Assets: Have relatively long life 3. Other assets: Miscellaneous assets that are not exactly current assets or fixed asset.

LIABILITIES
Claims against the business assets Financing of business Two main types of liabilities: 1. Current Liabilities: Claims that are due within one operating/business cycle (less than one year period). 2. Long term Liabilities: Outsiders claims not due within one operating cycle (due after one year).

OWNERS EQUITY
Claims of owners against firm assets Financing of business Summary of accounts showing contributions Two usual accounts for owners equity: 1. Common Stock 2. Retained Earnings * Partnership often shows only one account for owners equity instead of two.

RETAINED EARNING
The percentage of net earnings not paid out as dividends, but retained by the company to be reinvested in its core business or to pay debt.

COMMON STOCK
Stock that ordinarily has no preference in the matter of dividends or assets and represents the residual ownership of a corporate business.

RISK
RISK = uncertainty regarding the expected rate of return from an investment Directly related to investment RISK = RETURN

THANK YOU