When investing in real estate there are a number of considerations to take into account and without professional advice it's easy to become overwhelmed.
Sigma Real Estate has the experience and market knowledge to help you identify and evaluate investment properties based on your specified criteria.
Our Investment Appraisal reports are designed to provide a minimum level of due diligence before you purchase and can also be used to obtain finance, create investor presentations or build business plans for your property.
We offer three types of report, each varying in scope depending on your investment style:
Designed for the least complex properties with stable income, but limited scope to add value. This report provides a basic level of due diligence including:
Fee: plus
Suits moderately complex properties with opportunities for upward management, retrofitting and/or repurposing.
Includes everything under "Passive Investor" plus:
Fee: plus
Suits properties with multiple value-add scenarios e.g. retrofitting, renovation, conversion and/or redevelopment.
Includes everything under "Active Manager" plus:
Fee: plus
All fees are exclusive of reasonable out-of-pocket expenses and disbursements. Click Here for a full list of chargeable expenses.
You can also retain us to find properties for you and represent you at every stage of the acquisition process.
Click Here to find out more.
Knowing your investment style profile requires an evaluation of your risk/reward appetite. The primary question is whether an investment can achieve your investment goals while keeping risk at an acceptable level. The more risk you take, the higher the reward you should expect. When risk is measured against reward, investments can be compared (and combined), allowing you to find the most efficient investment strategy.
Knowing where to look for potential downside risks is essential, before you can evaluate if an investment is worth your time and resources. As a guide, the following is a brief overview of the various risk categories associated with a typical property investment:
Market Risks
Specific Risks
Macro Economy
Capital Markets
Property Market
Politics
Inflation
Location
Liquidity
Sector
Legal
Financing
Tenancies
Leasing
Management
Building
Environment
A conventional pricing model for real estate investment is based on CAPM theory, in which yields and discount rates are calculated by first taking a Risk Free Rate (RFR) and then adding a Risk Premium (RP), minus projected Growth (g). This is mathematically described by the following formula:
K = RFR + RFP - g
K = Yield/Discount Rate
RFR = Risk Free Rate (i.e. government bond redemption yields)
g = Growth Rate
The formula can be modified to account for all identifiable investment risks, which broadly fall into two categories, Market Risk (MR) and Property Risk (PR). The following provides an example:
K = RFR + RPMRM + RPPR – g + d
Market Risk and Property Risk can be further broken down into component risks such as economy and property market, location, liquidity, property-sector, legal, and tenancy risk. Lastly, Depreciation d is added because of its drag on growth g, as buildings need to be maintained or upgraded to keep-up with market expectations. In some cases it may not be possible or even appropriate to apply Growth or Depreciation explicitly. For example, in an unproven market, where growth cannot be measured accurately.
An Investment Appraisal will help you identify the risks by providing a minimum level of pre-acquisition due diligence, so that you are fully briefed on what you are getting into before comitting. This may include researching some or all of the following: the economcy and property markets, property title, historic land uses, property taxes, building characterisitics, planning status, lease review, etc.
When making investment decisions, time is not always on your side and you will often have to compete with other purchasers who have more resources. Sigma's team of qualified valuation professionals have over 50 years of collective experience and can increase your chances of making the right decision in a timely manner.
Once a property is identified (either by you or us) we will conduct the necessary research and analysis to verify its suitabilty, evaluate the risks and rewards and complete an appraisal to determine an acceptable purchase price.
Our findings and recommendations are delivered in a full narrative report addressed to you, usually within two weeks from receiving your instructions (i.e. signing back our Letter of Engagement).