Please find the attachment for the assignment details Word count: 2000 Due date: 5th April Document Preview: Real Estate Investment and Valuation Assessment Brief XXXXXXXXXX XXXXXXXXXX00L Real Estate...

Running Head: REAL ESTATE INVESTMENT AND VALUATION 1
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REAL ESTATE INVESTMENT AND VALUATION 2
Investor Analysis
Investor analysis forms the fundamental for determining the best portfolio and investment
strategy for the fund. In this case, it is a pension fund, and the level of expectation and
performance of the investments are expected to be higher. Most of the participants in this fund
are non-government employees who trust on these returns to manage their retired life. The
investment made in pension fund aims at providing the required return using which the
individual can lead their life without any trouble. The fund manager of a pension fund focuses on
generating a higher return at the moderate level of risks as the investors in most of the cases are
risk averse. The investors expect a certain level of guarantee for the investment made on these
pension funds that creates more pressure and challenge in determining the best suitable
investment strategy.
Investment Objective
Investors make long-term investment and aims to generate high long-term growth and
return on investment (Zhavoronkov, 2015). They are moderate risk takers but expect to get the
best return on their investment. Investor objective is to boost the long-term capital growth and to
generate high income from the investment.
Investment Analysis
The UK pension fund has an opportunity to make either direct or indirect investment in
the real estate. There are various advantages and disadvantages in making direct and indirect
investment in the real estates. An investment portfolio is recommended based on the various pros
and cons associated with each investment along with the risk and return expectation of the
investors.
REAL ESTATE INVESTMENT AND VALUATION 3
Direct Investment Advantage
The main advantage of making a direct investment in any commercial property in the
domestic country or foreign country is that the fund will have possession of the asset. At any
given situation the fund can provide the guaranteed return and will have a capital appreciation
(Mercer, n.d.). With the growth in the real estate making a long-term investment will generate a
higher return on investment when compared to the other investment.
The next main advantage is that this commercial real estate is let out either on lease or
rental basis that will generate a regular income for the investors. Similarly, the rental or lease
charges increases with the current market prevailing rates, and there is a continuous growth in
the income generate by them. They are not adversely affected by the economic condition of stock
market.
Direct Investment Disadvantage
There is a lack of diversification in the investment. The amount will be tied up only with
one single commercial building or two in different regions. If this commercial property is not
attractive, then it becomes difficult to generate higher income from them. It costs higher for the
fund for manage the asset so that they can protect them from any deterioration. It is difficult for
the fund to sell the property on time at the prevailing market rate as the buyers are limited
(Mercer, n.d.). If the property is held in a foreign country, then there are more restrictions on
repatriation that becomes a great challenge for distributing the funds at the time of maturity.
Changes in the tax rate and system create more challenge at the time of disposal.
Indirect Investment Advantage
The main advantage of the making indirect investment is that it will provide the best
diversification. As the indirect investment will enable the fund to make an investment in a wide
REAL ESTATE INVESTMENT AND VALUATION 4
range of real estate companies that are holding various properties across the globe (Snowden,
2016). They are highly liquid, and they can meet any investor requirement at any time without
causing any delay in payment. If in case a particular company or a country’s real estate not
performing well then there are chances where the other country’s real estate market will perform
well and can generate a higher return on investment. There are more opportunities for the
investment to obtain higher capital gains. The cost of maintaining...