INVESTMENT OF RENTAL HOUSING IN LONG BIEN DISTRICT –HANOI Preamble Currently the population of Hanoi was still growing very fast and the largely immigrant workers in Hanoi are from neigh
Trang 1INVESTMENT OF RENTAL HOUSING IN LONG BIEN DISTRICT –
HANOI Preamble
Currently the population of Hanoi was still growing very fast and the largely immigrant workers in Hanoi are from neighboring provinces to live and work Currently, Long Bien District in Hanoi has many projects which were put into operation and the problem is always painful and peak housing situation for the workers who work here Housing prices in Hanoi today is too high compared
to the income level of the people, especially the workers and employees, so rental housing is the solution that is almost done when they move to Hanoi to work and live In the eyes of investors, rental housing market can be profitable investment, high profit, high investment costs and less risk
I Project Description
1 Project overview
Currently, investor has 01 residential plot which was inherited Large piece of land is 300m2 in size 15x20 with the square land Plot of land is with the 02 surfaces, 01 line in the wide area is 4.5 m2, and the other is 2.5 m2, cars can take place in front of the house The plot has prime locations, in crowded residential neighborhoods, very near clinics; schools There are 02 options:
a One is: Sell the land for 40 million VND / 01m2, earn 12 billion VND Deposit that amount into the bank and get interest rate at 9% per 01 year
b Secondly, invest in building mini apartments for rent After 10 years, the investor can sell the property for 50 million VND per 01 m2 or continue trading more
Investment rental property project is a 10-storey mini apartment, located in the area of 300m2 The building includes 01 parking basement, 01 floor reserved for sale or rental kiosk investment business categories serving life for families living in the house and 09 floors are for rent Lot location situated in Long
Trang 2Bien ward, Hanoi, near Vinh Tuy Bridge, Sai Dong Industrial Park, just 7.5 km from Hoan Kiem Lake The land is not in the plans, which have been granted permission to use land permanently, which enables high-rise building Photos (Refer Appendix 1,2)
Currently in Long Bien district there are about 60 companies operating plants
in Sai Dong Industrial Zone A, B, Long Bien Industrial Park, Dai Tu There are also companies like 10 Garment Company, Duc Giang Garment company the number of workers and staff members currently work falls between 20,000 people
2 Detailed description of the project to build mini apartment for rent
a House design
The house was designed 10 floors with 01 basement floors In which:
The apartment is with 02 lifts and 01 staircase The total area of the stair and hall on each floor is 60m2 including 20m2 for stairs, 8m2 for elevator and 32m2 for lobby
The basement is used for parking
First floor:
- 02 small rooms, each measuring 15m2 closed for security guards and house management service
- 01 room measuring 50m2 for catering services and health fitness
- 01 mini supermarket large 70m2
- 01 rooms with 80m2 area for café, breakfast, lunch business
From the second floor to the seventh floor, there are 12 rooms in each with the area at 20m2
From the eighth floor to the tenth floor, there are 6 rooms in each with the area at 40m2
b The business services.
Apartment for rent with 02 kinds: 20m2 and 40 m2
Trang 3 Minimart has consumer goods such as fresh fruits and vegetables,
confectionery, beverages, tobacco, food, milk for children, the families of
consumer goods
Café, fast food service
Gym, fitness service
II Financial ratios calculation
1 The cost of the project (Unit: thousand VND)
a Cost of construction: Apartment with 10 floors and 01 basement The area
is 3,300 m2 (Unit: thousand VND)
b The cost for the basement (Unit: thousand VND):
c The cost for first floor (Unit: thousand VND)
Trang 413. Plastic tables and chairs for
d The cost for the 2nd floor to the 7th floor (Unit: thousand VND):
e The cost for the 8th floor to 10th floor (Unit: thousand VND)
3 Electric light in the
f Depreciation expenses of fixed assets, interest expenses
From the above data, assuming construction costs amortized in 10 years,
equipment and tools has 05 year amortization After 05 years, the equipment
Trang 5will be replaced entirely, we have a summary of initial investment costs as follows (Unit: thousand VND):
1.
Cost of construction 13,530,000
01 13,530,000
2 The investment cost of
equipment, fixed assets and
02 144,000
The cost for 2nd floor to 7th
409,800
The cost for 8th floor to 10th
127,200
In particular, the construction costs will be depreciated over 10 years Equipments are depreciated over 05 years After 05 years, new equipment will
be completely replaced We have the following table of depreciation
(Unit: thousand VND):
Year Cost of construction The cost of equipment,
tools and devices Total depreciation
Capital is raised from 02 sources: Equity and loans from banks In which:
Trang 6 Equity: 8,000 were raised from shareholders Capital came from 04 members, in which each person is with 2,000
Loans from banks: 7,000
Assumptions: Interest rate bank loans for home building and repair are now 12% / 01 years The plan is for the 05 years, the interest rate is fixed for 05 years Each year, the bank interest is 2,543,375.38 (211,947.95 / 01 months)
Borrowing costs by year table
Year Interest (thousand VND)
2 Revenue calculation - business operations cost (Unit: thousand VND)
a Sales - cost of rental operations
Assumptions:
After researching the current market, we decide the price for renting 01 room area 20m2 at mini apartment in Long Bien ward is 2,500 per month and 5,000 for the apartment with area 40m2 Total rental revenue is 270,000 per month
Assuming fixed equipment investment will be amortized in 05 years These small devices such as light bulbs, household sanitary housing repair and replace itself when damaged Therefore, all 01 year depreciation of equipment from 2nd floor to 10th floor is: 53,700 / 01 years
Costs of electricity and water will be paid by households therefore it is not included in this revenue - expenses table
We have monthly revenue from rental operations as follows:
1 Rent 2nd floor - 7th
Trang 72 Rent the 8th floor
b Revenue from supermarket operations.
Assumptions:
The revenue each day of the supermarkets is 10,000 so the revenue in 01 month is 300,000
Supermarket spends 150,000 on purchasing goods in 01 month
Employees payment: 06 people (including 02 cashiers, 03 salesman and 01 security): 30,000
General expenses include: Electricity, water: 5,000
We have the sales table as follows:
c The resulting table service business fitness training
Assumptions:
Exercise Room attracted regular 100 customers per month Each person plays 400/01 month Revenue is 40,000/01 month
Electricity and water expense: 3,000/01month
Salary for 02 employees: 10,000/month
1
2
Trang 85.
6
d Restaurant operation revenue - cost table
Assumptions:
The restaurant serves 100 times of customer for 3 sessions: morning, afternoon, evening Each customer pays 0.3 for a meal The revenue in 1 month is 90,000 equivalents to 1,080,000 per year
The restaurant spends 30,000 on purchasing goods equivalent to 360,000 per year
Salary for 04 employees including 02 cooks and 02 serving staff is 20,000 per month equivalent to 240,000 per year
Utility expense is 3,000 per month equivalent to 36,000 per year
e Management expense
Assumptions:
Salary for staff including 02 duty staff, 02 basement car look, 02 serving staff: 24,000 per month
Subsistence expenses for electricity services, water, sanitation, cable
Trang 93- Total expenditure
f From the above data, we have a summary of revenue - operating costs in
the first 05 years as follows (Unit: thousand VND)
Revenues from rental operations 3,240,000 Revenue from supermarket operation 3,600,000 Revenue from gym operation 480,000 Revenue from restaurant operation 1,080,000
Interest expense on borrowing 2,543,375 Expenses Cost of goods sold 2,160,000
In the next 05 years of the project, borrowing costs will be paid off, there are
only operating costs and depreciation costs
III Financial indicators calculation (Unit: thousand VND)
1 Report on operations management in the first year:
1. Sales of goods and services 8,400,000
3. Net revenue from sales andservices (03 = 01-02) 8,400,000
Trang 1000
5. Gross profit from sales of
goods and services (5 = 3-4)
6,240,0
00
6. Financial income
8. - Of which: Interest expense 2,543,3
75
11. Depreciation of fixed assets 1,448,800
12. Net profit from operations{12 = 5 + (6-7) - (9 + 10) -11} 1,047,825
16. Profit before tax (16 = 12 +15) 1,047,8 25
17 Current income tax expense 261,9 56
18 Deferred income tax expense
-
19. Profit after income tax (19 =16-17 - 18) 785,8 69
20 Profit divided by shareholders 30% 235,7
61
21. Retained earnings reinvested 40% 314,348
22. Profits additional net working capital 30% 235,761
Trang 112 Ten years business result management report
Assumptions:
Interest rate unchanged at 12% in 05 years
Profit divided by shareholders is 30%, retained earnings reinvested in the next year is put into operation in long
term savings with interest rate of 7% / 1 year, this section will not be included the production in activities of the next year 30% remaining will be added to the net working capital
No CATEGORY Note Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
1. Sales of goods and
services 8,400,000 8,400,000 8,400,000 8,400,000 8,400,000 8,400,000 8,400,000 8,400,000 8,400,000 8,400,000
2.
goods and services (03
= 01-02)
8,400,0
00 8,400,000 8,400,000 8,400,000 8,400,000 8,400,000 8,400,000 8,400,000 8,400,000 8,400,000
4. Cost of goods sold 2,160,000 2,160,001 2,160,002 2,160,003 2,160,004 2,160,005 2,160,006 2,160,007 2,160,008 2,160,009
sales of goods and
services (5 = 3-4)
6,240,00
0 6,239,99 9 6,239,99 8 6,239,99 7 6,239,99 6 6,239,99 5 6,239,99 4 6,239,99 3 6,239,99 2 6,239,99 1
6.
Trang 128. - Of which: Interest
expense
2,543,3
9. Cost of sales 852,000 852,000 852,000 852,000 852,000 852,000 852,000 852,000 852,000 852,000
10. Administration Costs 348,000 348,000 348,000 348,000 348,000 348,000 348,000 348,000 348,000 348,000
11. Depreciation of fixed
assets 1,448,800 1,448,800 1,448,800 1,448,800 1,448,800 1,448,800 1,448,800 1,448,800 1,448,800 1,448,800
operations {12 = 5 +
(6-7) - (9 + 10) -11}
1,047,8
25 1,047,824 1,047,823 1,047,822 1,047,821 3,591,195 3,591,195 3,591,195 3,591,195 3,591,195
16. Profit before tax (16 =
12 + 15) 1,047,82 5 1,047,82 4 1,047,82 4 1,047,82 4 1,047,82 4 3,591,19 6 3,591,19 6 3,591,19 6 3,591,19 6 3,591,19 6
17. Current income tax
261,95
6
261,95
6
261,95
6
261,95
6
261,95
6
897,79
9
897,79
9
897,79
9
897,79
9
897,7
99
18. Deferred income tax
19. Profit after income
tax (19 = 16-17 - 18)
785,86
9
785,86
9
785,86
9
785,86
9
785,86
9
2,693,39
6
2,693,39
6
2,693,39
6
2,693,39
6 2,693,39
6
Trang 1320. Profit divided by
21. Retained earnings
reinvested 40% 314,348 314,348 314,348 314,348 314,348 1,077,359 1,077,358 1,077,358 1,077,358 1,077,358
22. Profits additional net
working capital 30% 235,761 235,761 235,761 235,761 235,761 808,019 808,019 808,019 808,019 808,019
Spreadsheet savings rate investments and retained earnings
Trang 143 The project cash flow
With the current corporate income tax is 25%
We have in the first 05 years OCF = 785,869 + 1,448,800*25% = 1,148,069
In the next 05 years OCF = 2,693,369 + 1,448,800*25% = 3,055,596
At the end of the 10th year, the entire house sold for 50,000 / 01m2 grossed 15,000,000 At the same time maturing passbook savings of principal and interest received shall be: 8,723,847
Year Operating cash flow Cash flow from
investing activities
Total cash flow
4 The financial indicators decision:
a NPV = 3,207,153.71 >0
b IRR = 15%> 12%
c ROE:
In the first 05 years ROE = 785,869/ 7,009,000 = 11.21%
In the next 05 years ROE = 2,693,396/ 7,009,000 = 38.43%
d ROE:
In the first 05 years ROE = 785,869/7,009,000 = 5.61%
In the next 05 years ROE = 2,693,396/ 7,009,000 = 19.22%
IV Project Evaluation (Unit: thousand VND)
Trang 15Based on the results, we see NPV > 0 and IRR > 12 % This shows that the project is feasible and we can invest in
ROE shows profit increased 11 % and 38.43 % after paying off the bank loan interest This is a high profit margin indicates that 01 out of the capital, will be collected in the first 05 years at 0.11 and 0.3843 for the next 05 years
On the other hand, compared with the sale of the property at the present time and take the profit savings banks have:
Interest = 12,000,000 * (1 +12 %) 10 = 23,605,816
The project brought the ending profit at about: 26,779,443 have a difference of 2,694,627 The value of assets sold after 10 years is 15,000,000 In fact, with the current rate of development of Hanoi, the value of the house after 10 years is much higher, so the difference will be even greater The advantage of the investor is not investing money to buy the land by inheritance, less than the original cost
After 10 years, instead of selling the house, investors can still continue trading The business now investors are not subject to interest received ROE is 38.43 % In 20 years, assuming the investor can keep the house to live in and not sell it, then save the original interest received is: 31,951,509 NPV = 1,227,860.35 and IRR = 13 % The plan is still workable
Plan above does not mention to the profits that the shareholders are divided yearly (30 %) If the money is not divided but retained for reinvestment of savings, after 10 years, the principal and interest savings will be 14,129,260, profit will increase by 5,405,413 compared with 30% profit sharing plans that are mentioned in the article That is in addition to the profits of this project, the shareholders will have a total of 5,405,413
if the money is divided to provide savings