Property And Equity

Question 1

Prime property

Answer 1

1. Location
2. Age and condition
3. Comparability
4. Lease structure
5. Tenants
6. Size

**obsolescence
**owner changing investmeng

Question 2

Propert running yield

Answer 2

Rental income (net)/cost of purchase(gross)

Question 3

Considerations when buying property

Answer 3

1. Can you afford it
2. Do you need a loan
3. Will you be able to pay back loan
4. Do you want a fixer up or complete
5. Use of property
6. If rental self mngmnt/co
7. If rental - void seasons
8. Long term plans
   9.retrictions in deeds of property
9. Supply and demand

Question 4

Investment risks and characteristics of property

Answer 4

1. Void and default
   - no payment
2. Indivisible
   -prevent smaller funds and individuals from investing
3. Volatility
   - long term
   - stable in the short term/greater site value
4. Investment characteristics
   - redevelopment or renegotiation
5. Valuation
   - subjective and expensive
6. Uniqueness
   - harder to value and market
7. Utility
   - feel good for investors
8. Yield (running)
   - lower for property than conventional bonds
9. Income streams
   - stepped
10. Marketable
    - unmarketable
11. Real return
    - moves broadly in line with inflation
12. Expected return
    - less Marketable and secure -> higher return
    - relatively stable
13. Political
    - rent and planning controls
14. Obsolescence
    - slow growth
15. Cost
    - high dealing costs
16. Terms
    - short to long
17. Size
    -large

Question 5

Investment and risk characteristics of equities

Answer 5

1. Depends on profitability of company
2. Long term.real yield
3. Higher expected return
4. Dividends and pricing can be volatile
5. Can be held to perpetuity
6. Marketability
7. Quoted vs unquoted

Question 6

Why use industry groupings to categorise shares

Answer 6

1. Practical for analyst to specialise I 1 area
2. Share prices for companies in same sector are correlated
3. Factors affecting 1 company in sector like to affect all
4. Useful Information for 1 company will be useful for all
   5..data can be retrieved from common source in same format
5. Can’t expect to be an expert in all areas
6. Structures decision making process
7. Portfolio classification and management

Question 7

Equity payout ratio

Answer 7

Dividend per share/earnings per share

Question 8

Why buying back shares

Answer 8

Cite
Capital structure change
Improve earnings
Tax advantages for investors
Excess cash

Question 9

Disadvantages of property investment

Answer 9

1. SizE
2. Expertise needeD
3. DiVersification
4. VaLuation
5. Less marketable

Question 10

Quoted share advantages

Answer 10

1. DIvisibility
2. InforMation
3. MarkEtability
4. EaSier to value
5. Security

Question 11

Factors that companies in a sector share

Answer 11

1. Resources and inputs
2. Market - supple and demand
3. Similar financial structires - same interest impacts

Question 12

Problems with industry groupings

Answer 12

1. Multi industry company
2. Heterogeneity