Our goal is to identify strategic investors who would be interested in financing the construction of the project Felicia Gardens and then establishing a short-term rental business. The marketing and promotion of the villas will be outsourced to a third-party property manager. Based on a ten-year feasibility study conducted by Amazon Investments, the venture is expected to provide a yield ranging from 4.5-7.8% and an IRR of 9%.
The table below summarizes the expected revenues, expenses, taxes and profits of the rental business as a newly established company according to the main and more realistic scenario.
| PROJECTED INCOME STATEMENT € | ||||
|---|---|---|---|---|
| Year | 1 | 4 | 7 | 10 |
| Total Revenue (€) | 275546 | 420068 | 459019 | 501583 |
| Marketing Expenses | 27555 | 42007 | 45902 | 50158 |
| Energy, Fuel and Water | 37674 | 57434 | 62759 | 68579 |
| Other Expenses | 9170 | 10647 | 11287 | 20312 |
| EBITDA | 201148 | 309980 | 339072 | 362534 |
| EBIT | 86950 | 195782 | 226224 | 252386 |
| Total Taxation | 10869 | 24473 | 28278 | 31548 |
| Net Accounting Profit | 76081 | 171309 | 197946 | 220838 |
| Accounting Profit | 1.8% | 4.1% | 4.7% | 5.3% |
| Depreciations | 114198 | 114198 | 112848 | 110148 |
| Net increase in Cash | 190279 | 285507 | 310794 | 330986 |
| Net Yield (RoI) | 4.5% | 6.8% | 7.4% | 7.9% |
In our analysis, we also considered two extreme scenarios in order to examine the sensitivity of the project in external crises related with tourism, which will mainly affect the rental business and not the selling prospects of the property. We consider an absolute reduction of the rentals of 10% and 20% respectively.
| EARNINGS BEFORE TAX € | ||||
|---|---|---|---|---|
| Year | 1 | 4 | 7 | 10 |
| Scenario 1st (TR) | -4200000 | 270177 | 329247 | 360055 |
| Scenario 2nd (TR -10%) | -4200000 | 242437 | 295566 | 323251 |
| Scenario 3rd (TR -20%) | -4200000 | 212882 | 259682 | 284040 |
| EARNINGS AFTER TAX € | ||||
|---|---|---|---|---|
| Year | 1 | 4 | 7 | 10 |
| Scenario 1st (TR) | -4200000 | 250680 | 302366 | 328817 |
| Scenario 2nd (TR -10%) | -4200000 | 226407 | 272895 | 296613 |
| Scenario 3rd (TR -20%) | -4200000 | 200546 | 241497 | 262303 |
| IRR | Earnings before Taxes (EBT) | Earnings After Taxes(EAT) | ||||
|---|---|---|---|---|---|---|
| Scenarios | 1st | 2nd | 3rd | 1st | 2nd | 3rd |
| IRR | 9.3% | 8.6% | 8% | 8.8% | 8.2% | 7.6% |