DEPARTMENT OF ESTATE MANAGEMENT

FACULTY OF ARCHITECTURE, PLANNING AND SURVEYING,

UNIVERSITI TEKNOLOGI MARA PERAK

GROUP ASSIGNMENT FOLDER

Course Code: REM211
Course Name: INVESTMENT VALUATION AND APPRAISAL
Class: AP1153I
Name of Group Members Matric No
SHAIBATUL HAMDI MOHD NAZRI 2019244712

MUHAMMAD QAYYUUM BIN ROHAIDI 2019246628

ALIYANA BINTI BRAHIM 2019208588

NURAISYAH FARIAH BINTI AHMAD ZAWAWI 2019430676

SITI NOR AISHAH BINTI ABDUL AZIZ 2019297526

Name of Group Leader: MUHAMMAD QAYYUUM BIN ROHAIDI

Matric No: 2019246628
Assignment Title: IDENTIFY ONE DOUBLE-STOREY SHOPHOUSE WHETHER OUTSIDE PERAK

Due date of Assignment: 21/10/2020

Submission Date: 8/1/2021

Submitted To: NUR FATIN BINTI MOHAMMAD NASIR

DECLARATION: We declare that no part of this assignment has been copied from other
person’s work except where due acknowledgement is made in the text, and no part of this
assignment has been written for me by any other person except where such collaboration has
been authorized by the lecturer concerned

Group’s Leader Signature.............................................. Date: 8/1/2021

A lecturer/tutor has and may exercise a right not to mark this assignment if the above
declaration has not been signed. If the above declaration is found to be false, no mark will be
awarded for this assignment.

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TABLE OF CONTENTS

NO CONTENT PAGES

1.0 ACKNOWLEDGEMENT 2

2.0 INTRODUCTION 3

3.0 BACKGROUND

3.1 LANDLORD AND TENANT

3.2 DESCRIPTION OF PROPERTY 4 - 14

3.3 LOCATION

3.4 FACILITIES NEARBY

4.0 COLLECTION OF DATA 15 - 18

5.0 VALUATION OF INVESTMENT 19 - 22

6.0 CONCLUSION 23

7.0 REFERENCE 24

8.0 APPENDIX 25-35

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1.0 ACKNOWLEDGEMENT

The outcome of this assignment required a lot of guidance and assistance from many
people and we extremely fortunate to have got this all along the completion of our assignment
work. Whatever we have done it within the limited time frame with guidance and assistance
and we would not forget to thank them. We respect and thank to Miss Nur Fatin Binti
Mohammad Nasir for giving us an opportunity to do this assignment work and providing us all
support and guidance which made us complete the assignment on time.

We would like to give a special gratitude to Yee Hang Paints & Hardware SDN BHD
who is the tenant of a Subject Property for accepting our request and giving us opportunity to
use his tenancy agreement. The good cooperation from him had make us easier to finish this
task.

Last but not least, many thanks go to the head of the group, Muhammad Qayyuum, whose
have given his full effort in guiding the team to achieving the goal as well as his encouragement
to maintain our progress in this project. This assignment also cannot be complete without the
effort from all the group members, Shaibatul Hamdi Mohd Nazri, Aliyana, Aisyah Fariah and
Siti Nor Aishah and our wonderful classmate who helped us a lot in finalizing this assignment
within the time given. We also would like to express our gratitude to all the respondents for
give a support and willingness to spend sometimes with us to fill in the questionnaires

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2.0 INTRODUCTION

Determination of the Capital Value of freehold interest is the requirement of this

assignment. Therefore, we need to find a tenancy agreement. The subject property must be a
double storey commercial building located in or outside Perak need to be identified. Buildings
that intended to generate a profit either from capital gain or rental income is known as
commercial building.

The investment method of valuation that’s being used in this assignment are term &
reversion and vacant possession. The rental per annum of our subject property need to be
obtained from the leasing contract or known as tenancy agreement, identify the rental value of
similar properties, market value and determine All Risk Yield. The capital value of freehold
interest is importantly need to be identified. Term and reversion are a valuation used when the
property is rent out at a current rental for a certain period of time and after the period of time,
the property will be return back to the freeholder at reversionary term. Furthermore, vacant
possession method is being practiced because the first floor of subject property is vacant.

We successfully had brought together all the information and we successfully compiled
and prepared a complete report with all the requirements needed.

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3.0 BACKGROUND OF THE SUBJECT PROPERTY

3.1 Landlord and Tenant

Our lecture has assigned us to make a report based on double-storey shophouse whether
outside Perak. After a series of discussions and reaching a conclusion, we had a decision to
choose a double storey shophouse located at No. 3 & 3A, Jalan Parklands 1, Taman Semenyih
Parklands, 43700, Beranang, Selangor Darul Ehsan. This double-storey shop house is owned
by Seow Wei Tze and it is rented to a tenant Yee Hang Paints & Hardware SDN BHD. The
tenant rents for the whole building which is the ground floor and first floor where the ground
floor run a hardware business and the first floor is vacant. This store run a hardware business.

3.2 Description of Subject Property.

The building type of this property is commercial building and the property that we had
is a double-storey shophouse which is at intermediate side. The subject property shape is
rectangular, and the land is flat. For the land size both the ground floor and upper floor have
the same area which is 22 X 75 feet approximately 2100 square feet. The rental value of 2
months is RM 4,000 ringgit only meanwhile for the rental received is RM 2,000 per months.
Market value of the double-storey shophouse at that area is RM 1,300, 000 ringgits.

Figure 3.2 (i) – A picture of the subject property

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3.3 LOCATION OF SUBJECT PROPERTY

The distance of the subject property is approximately about 150m from the main road.
The Gerobok JC is located on the first left junction from Jalan Parklands Utama road. The
exact location of the subject property is at No. 3 & 3A, Jalan Parkland 1, Taman Semenyih
Parklands, 43700 Beranang, Selangor Darul Ehsan.

Figure 3.3 (i) – Location plan of the subject property via Google Map.

Figure 3.3 (ii) – Location plan of the subject property via Google Earth.

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3.4 FACILITIES NEARBY

In choosing property or real estate, there are so many factor to look after, for instance
facilities nearby. This is because the facilities will affect business and even market value of
some property. From our observation, they are many facilities available with not exceeding 6
kilometer radius from the subject property.

First of all, the nearest facilities spotted from the subject property is convenience store
and supermarket which is 99 speedmart, 7 eleven, pasaraya Hamnah and pasar raya desa segar.
Next, there is also various type of clinic available near the subject property which are dental
clinic, family clinic and also acupuncture clinic. Plus, there is also a government district clinic
which is klinik kesihatan beranang not far from the subject property. The subject property also
located near to other amenities for instance laundry services.

Besides the subject property also located near to others main property which are police
station, fire and rescue station and post office. Mosque, multipurpose hall, bank and ATM are
also available nearby the subject property. In addition, there are also a few types of restaurant
available closed to the subject property. Pizza hut, McDonalds and KFC are the example of
fast food restaurant and nasi kukus tok’we for casual dining.

Furthermore, there is also a school, college and health training center available for
education purpose closed to the subject property. In addition, there is also a hotel nearby the
subject property as accommodation to stay for tourist. Lastly, there is a kompleks penghulu
mukim beranang for administration purposes near the subject property.

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 The following table shows some of the facilities available close to the subject properties
within 6 kilometer radius. The picture was taken while inspection and via Google earth.

Facilities/ services Distance from subject property Period from

sp to reach
the facilities/
services

100 meter 1 minute

Figure 3.4 (i)

a) Super market

1.5 kilometers 4 minute

Figure 3.4 (ii)

b) Government clinic

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 1.6 kilometer 3 minute

Figure 3.4 (iii)

c) Health training centre (UKM)

3.4 kilometer 6 minute

Figure 3.4 (iv)

d) Pos office

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 3.4 kilometer 6 minute

Figure 3.4 (v)

e) Police station

2.8 kilometer 6 minute

Figure 3.4 (vi)

f) Mosque

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 2.7 kilometer 5 minute

Figure 3.4 (vii)

g) School

2.6 kilometer 5 minute

Figure 3.4 (viii)

h) Multipurpose hall

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 200 meters 1 minute

Figure 3.4 (ix)

i) Clinic

5 kilometer 12 minute

Figure 3.4 (x)

j) Fast food restaurant

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 5.8 kilometer 6 minute

Figure 3.4 (xi)

k) Government office

1.3 kilometer 3 minute

Figure 3.4 (xii)

l) Bank & atm

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 5.2 kilometer 12 minute

Figure 3.4 (xiv)

m) Fire and rescue station

2.6 kilometer 4 minute

Figure 3.4 (xv)

n) Convienience store

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 2 kilometer 4 minute

Figure 3.4 ( xvii)

o) Hotel

2.6 kilometer 5 minute

Figure 3.4 (xviii)

p) Laundry service

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4.0 COLLECTION OF DATA

Rent Received

For rent received of our subject property, it’s stated in the tenancy agreement that both
ground floor and first floor was being rented for RM2,000. It is because the tenant is rent both
floor of the property. But this is not the net rental received because, the tenant is responsible to
pay all the outgoing of the property. So, to get the net rental received, firstly we have to assume
the total of outgoing for this property. And then, the rent received which is RM2,000 will be
deduct with outgoings to get the net rent received.

Outgoings

The outgoings are considered to be 20% of the rent paid. Assessment, external repair,
internal maintenance, insurance, leave rent and management are the results of outgoings. Figure
4.0 (i), this is because it has been mentioned in the tenancy agreement that the tenant is not
hereby to pay for all outgoings.

It was understood from the tenancy agreement for rental value that they have to pay only
for the rent hereby reserved, performing and observing the several covenants and stipulations
on his part. But, because of the lack of information, we presume that the rental value is net.

Figure 4.0 (i), the tenant is not hereby to pay for all outgoings

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Market Value

From this assignment, we obtained the market value from the estate agent through
WhatsApp. We had selected the appropriate property nearby during the inspection of the
comparable property to be the market value for our subject property. Figure 4.0 (ii), this is
because the comparable property selected is also a double-storey store and the distance is 1.6
km from the subject property, it is situated at Jalan Kesuma 3/11, Bandar Tasik Kesuma, 43700
Beranang, Selangor. Figure 4.0 (iii), the market value of the property to be let is between RM
1,200,000 and RM 1,300,000. For the subject property referring to the tenancy agreement
obtained, it is situated at No 3&3A, Jalan Parkland 1, Taman Semenyih Parklands, 43700,
Beranang, Selangor. Meanwhile, the sale price for double-storey shops is not specified in the
tenancy agreement. Therefore, it only has the rental value for the whole building, we didn't
have to make any adjustments because it was exactly the same with subject property as it was
obtained from the real estate agent. Hence, in order to measure the All-Risk Yield, we
determined the value to be our market value.

Figure 4.0 (ii), distance between subject Figure 4.0 (iii), we obtained the market
property to comparable property value through WhatsApp via an estate agent

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Rental Value

For rental value of similar property, we have done some research from online sources
like iProperty. From these sources, we found a similar property with subject property with a
rental value for RM2,800 per month for the ground floor and RM1,000 per month for the first
floor. Most of the rental value of double-storey shophouse in that area are the same. The rental
price range for the ground floor is around RM2,700-RM2,800 per month meanwhile for the
first floor is from RM1,000 per month. Not only that, some of our team done some inspection
at the subject property area and found a similar property. But the property is vacant and at the
outside of the property, it stated the phone number of an estate agent. So, we called the estate
agent to get the rental value of that property. We contacted the agent through WhatsApp and
ask him about the rental value for double-storey shophouse in that area. The agent informed us
that the rental value for ground floor is RM2,800 per month and for the first floor is RM1,000
per month. So, we take the highest amount which is RM2,800 for the ground floor and
RM1,000 for the first floor, which is makes the total of rental value of similar property is
RM3,800 per month for both floors.

Figure 4.0 (iv), rental rate for similar property via iProperty

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Figure 4.0 (v) and 4.0 (vi), rental rate for similar property via an estate agent

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5.0 VALUATION OF INVESTMENT

I. CALCULATION OF RENTAL RECEIVED

According to the tenancy agreement, it was stated that the landlord is responsible to pay
for all outgoings on the ground floor. Since the landlord is responsible to pay for all of
that, the type of rental lease is gross rent. The tenant will not pay for any outgoings for
this type of rental.
Rental received RM 2,000 x 12 months RM 24,000

(-) Outgoing @20% 0.2 x RM 24,000 (-) RM 4,800

Net rental received RM 19,200 per annum

(net)

ASSUMPTION:
The outgoings will be assumed to be 20% from the rental received. The example of the
outgoings that will be paid by the landlord are rates, quit rents, repair and maintenance,
management cost and others.
Since this tenancy involve the ground floor only, the calculation for the first floor will
be using the Vacant Possession method.

II. CALCUTION OF THE RENTAL VALUE

The rental value for the ground floor and the rental received for the first floor are
determine based on the market value that was told by an estate agent that we contacted
before.
Ground floor
Rental value RM 2,800 x 12months
RM 33,600 per annum (net)

ASSUMPTION:
The rental value for the ground floor is assume to be RM2,800 per month(net).

First floor
Rental received RM 1,000 x 12 months
RM 12,000 per annum (net)

ASSUMPTION:
While, the rental received for the first floor is assume to be RM1,000 net monthly.

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 Total rental value = RM 33,600 + RM 12,000
= RM 45,600

III. CALCULATION FOR ALL RISK YIELD

All Risk Yield = RM 45,600 x 100
RM 1,300,000
= 3.5%

All Risk Yield is determine using the formula as follow:

ARY = Rental Value x 100
Capital Value

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IV. CALCULATION OF CAPITAL VALUE
In order to calculate the capital value for the ground floor of the subject property, the
Term & Reversion method is used.

Ground floor

Rental p.a

Reversion
RM 23,600

Term
RM 19,200 3.5%

3%

Years
2

Term
Rent received RM 19,200
YP for 2 years @ 3% 1.9135
RM 36,739.20
(+) Reversion
Rental value RM 33,600
YP in Perp @ 3.5% 26.6717
deferred 2 years
(+) RM 896,169.12
Capital Value for RM 932,908.32
Ground Floor

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 As per said, the first floor is not occupied so that the Vacant Possession method is used
to calculate capital value for the first floor of the subject property.

First Floor

Rental p.a

RM 12,000

3.5 %

Years

Rental Value RM 12,000

YP in Perp @ 3.5% 26.6717

Capital Value for First RM 320,060.40

Floor

V. CALCULATION FOR THE CAPITAL VALUE OF FREEHOLDER’S INTEREST

The get the capital value of freeholder’s interest, the total of capital value for the both
floors of the property will be total up together. The price of the capital value of the
ground floor (Term & Reversion) which is at RM 932,908.32, will be add to the price
of the capital value of the first floor (Vacant Possession) which is at RM 320,060.40.
Capital Value Price

Capital value of the ground floor RM 932,908.32

Capital value of the first floor RM 320,060.40

Capital value of freeholder’s interest RM 1,252,968.72 say @RM 1,253,000

Thus, as calculated, the Capital Value freeholder’s interest for the subject property will
be at RM 1,253,000.

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6.0 CONCLUSION

In conclusion, this assignment has taught us about how to do a proper valuation in real
field work. In order to accomplish this valuation, we must know the step to be taken. Firstly,
we have to obtain a tenancy agreement of our subject property in order to get the amount of
rent received. Also, through the tenancy agreement, we can see either the rent is gross rent or
IR. Tenancy agreement was the important thing for us in completing this task and without the
tenancy agreement, we are not able to calculate the capital value of freehold interest.

Due to the pandemic situation, it was a bit challenging for us to find similar property as
our comparable property and do surrounding inspection. We have to find the comparable
property though online sources like iProperty, Property Guru, Property Market Research
(PMR) and etc. The inspection also needs to be done through Google Earth because of our
location is different with each other.

We have learned that we must be careful with all information gathered because even a
simple mistake can bring a miscalculation and mistake to our valuation. We also realize that
we have to work together as a team from collecting information to make the valuation. Lastly,
this assignment gives a new and fresh knowledge to us and we believe, it will help us in the
real estate industry in future.

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7.0 REFERENCE

1) https://www.iproperty.com.my

2) https://www.google.com.my/maps

3) https://www.google.com/earth/

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8.0 APPENDIX

I) FROM IPROPERTY WEBSITE

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II) TENANCY AGREEMENT

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