investing in a studio apartment in the west of amman jordan

INVESTMENT OPPORTUNITIES IN JORDAN

Investing in a Studio Apartment in the West of Amman - Jordan Feasibility Study – Version One

Tariq Al-Basha – Feasibility Study Specialist

5/25/2015

The purpose and scope of this feasibility study is to introduce the subject matter and provide a general idea and information on the said area. All the material included in this document is based on data/information gathered from various sources and is based on certain assumptions. Although, due care and diligence has been taken to compile this document, the contained information may vary due to any change in any of the concerned factors, and the actual results may differ substantially from the presented information.

Tariq Al-Basha - 00962 7 9767 7418 - [email protected]

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Contents Executive Summary ................................................................................................................... 4

Assumptions .............................................................................................................................. 5

Cash Flow (In & Out).................................................................................................................. 6

About the Author ........................................................................................................................ 7


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﴿قالوا سبحانك ل علم لنا إلا ما علامتنا إناك أنت العليم الحكيم﴾

صدق هللا العظيم

23آية –سورة البقرة


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Executive Summary The aim of this feasibility study is to encourage the investments in the Jordanian real estate

sector generally and in the residential sector in particular. This is based on the latest figures in

the Jordanian real estate transactions for 2014 which hit a record of JOD 10 billion (USD 14

billion)1.

Therefore, this study assumes that:

1. The total amount of investment is JOD 34,000 (Almost USD 48,000).

2. Total revenue during the 10 years of investment is JOD 60,000 (Almost USD 85,000), in

which the average annual revenue from rent is JOD 6,000 (Almost USD 8,500).

3. The book value, after depreciation, for the studio is going to be JOD 24,000 (Almost

USD 34,000) in Year 10.

4. The payback period is going to be 6 years and based on the net present value (NPV) is

going to be 7 years.

5. The return on investment (ROI) from rent and selling the studio is going to be more than

131% and the internal rate of return (IRR) is going to be almost 20% in Year 10.

No. Description Entry Unit

1 Total Investment 34,000.00 JOD

2 Total Revenue for 10 Years 60,000.00 JOD

3 Selling Price for the Studio in Year 10 24,000.00 JOD

4 Payback Period 6.00 Year

5 Payback Period (NPV) 7.00 Year

6 Return on Investment (ROI) in Year 10 131.18% %

7 Internal Rate of Return (IRR) in Year 10 19.61% %

1 Source: Jordan’s Ministry of Public Works and Housing. Dated 14/4/2015


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Assumptions This study assumes that:

1. The size of the studio apartment is 30 sqm.

2. The price per sqm is JOD 1,000.

3. The total price for the studio apartment is JOD 30,000.

4. The registered price at the Jordanian Department of Land and Survey is JOD 3,000.

5. The annual rent price decreases JOD 25 monthly or JOD 300 annually every two year.

6. The studio apartment will depreciate 2% or JOD 600 of the studio total price. Thus, the decrease value of the studio will be

JOD 6,000 and its selling price will be JOD 24,000 (Book Value) in Year 10.

7. The percentage of the property tax is going to be 2% of the registered price for the studio (JOD 3,000).

8. The property tax is going to be JOD 60 annually.

Entry Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Apartment size (sqm) 30.00

Price per sqm 1,000.00

Studio Price 30,000.00

Registered Price 3,000.00

Monthly Rent (JOD) 550.00 550.00 525.00 525.00 500.00 500.00 475.00 475.00 450.00 450.00

Annual Rent (JOD) 6,600.00 6,600.00 6,300.00 6,300.00 6,000.00 6,000.00 5,700.00 5,700.00 5,400.00 5,400.00

Depreciation (%) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%

Depreciation Value (JOD) 600.00 600.00 600.00 600.00 600.00 600.00 600.00 600.00 600.00 600.00

Annual Property Tax (%) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%

Annual Property Tax (JOD) 60.00 60.00 60.00 60.00 60.00 60.00 60.00 60.00 60.00 60.00


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Cash Flow (In & Out) Entry Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Investment Cost

Buying a Studio 30,000.00

Buying Furniture 4,000.00

Total Investment (Annually) 34,000.00 - - - - - - - - -

Total Investment (Cumulative) 34,000.00 34,000.00 34,000.00 34,000.00 34,000.00 34,000.00 34,000.00 34,000.00 34,000.00 34,000.00

Cash In

Rent Revenue 6,600.00 6,600.00 6,300.00 6,300.00 6,000.00 6,000.00 5,700.00 5,700.00 5,400.00 5,400.00

Selling the Studio

24,000.00

Total Cash In (Annually) 6,600.00 6,600.00 6,300.00 6,300.00 6,000.00 6,000.00 5,700.00 5,700.00 5,400.00 29,400.00

Total Cash In (Cumulative) 6,600.00 13,200.00 19,500.00 25,800.00 31,800.00 37,800.00 43,500.00 49,200.00 54,600.00 84,000.00

Cash Out

Development Expenses

300.00 300.00 300.00 300.00 300.00 300.00

Maintenance Expenses

200.00 200.00 200.00 200.00 200.00 200.00 200.00 200.00 200.00

Property Tax 60.00 60.00 60.00 60.00 60.00 60.00 60.00 60.00 60.00 60.00

Others 120.00 120.00 120.00 120.00 120.00 120.00 120.00 120.00 120.00 120.00

Total Cash Out (Annually) 180.00 380.00 380.00 380.00 680.00 680.00 680.00 680.00 680.00 680.00

Total Cash Out (Cumulative) 180.00 560.00 940.00 1,320.00 2,000.00 2,680.00 3,360.00 4,040.00 4,720.00 5,400.00

Net Cash (Annually) (27,580.00) 6,220.00 5,920.00 5,920.00 5,320.00 5,320.00 5,020.00 5,020.00 4,720.00 28,720.00

Net Cash (Cumulative) (27,580.00) (21,360.00) (15,440.00) (9,520.00) (4,200.00) 1,120.00 6,140.00 11,160.00 15,880.00 44,600.00

Net Present Value (NPV) (26,266.67) (20,624.94) (15,511.02) (10,640.63) (6,472.27) (2,502.40) 1,065.22 4,462.95 7,505.51 25,137.10

Return on Investment (ROI) -81.12% -62.82% -45.41% -28.00% -12.35% 3.29% 18.06% 32.82% 46.71% 131.18%

Internal Rate Of Return (IRR)

-41.04% -18.64% -6.44% 1.38% 6.31% 9.73% 12.03% 19.61%


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About the Author

Awarded First Class Honours in Bachelor of Arts

(Honours) Business Management from the

University of Greenwich – UK.

Previously worked as a Project Finance Officer

for an Iraqi-owned Group in which representing

the CEO and shareholders' interest in 29

companies, subsidiaries and affiliates in Iraq,

Jordan, Lebanon and UAE.

Working as a Marketing & Business

Development Officer at an engineering

consultancy firm in Jordan.

Previous works related to feasibility studies:

1. Feasibility & Financial Studies for Mall &

Hotel in Basra – Iraq; the total land area is

5,810 m² and the total built-up area is 25,988

m².

2. Feasibility & Financial Studies for Medical

Diagnostic Center in Basra – Iraq; the total

land area is 7,770 m² and the total built-up

area is 18,350 m².

3. Financial Studies for Mixed-use Development in Basra – Iraq; the total land area is

152,367 m² and the total built-up area is 77,949 m².

4. Financial Studies for Mixed-use Development in Basra – Iraq; the total land area is


5. Financial Studies for Mall & Hotel in Karbala – Iraq; the total land area is 6,511 m² and

the total built-up area is 21,400 m².

6. Financial Studies for Medical Diagnostic Center in Baghdad – Iraq; the total land area is


7. Financial Studies for Mixed-use Development in Baghdad – Iraq; the total land area is


8. Financial Studies for a Mall in Al Najaf – Iraq; the total build-up area is 35,053 sqm.

investing in a studio apartment in the west of amman jordan

Real Estate