EGR 403 – Project II Team 12 Lala Garabidian……...( Organizer) Phat Bao………………( Organizer) Phat Bao………………( Organizer) Samuel Mangampo……..( Techie ) Mark.
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EGR 403 – Project II Team 12 Lala Garabidian……...( Organizer) Phat Bao………………( Organizer) Phat Bao………………( Organizer) Samuel Mangampo……..( Techie ) Mark Mckinney……..( Summarizer ) Buying A House vs. Buying A Condo
Scenario Mr. Cal Poly, Pomona alumni graduated in 1999 as an Electrical Engineer who is 32 years old and makes $54K a year. He currently has $27K in his savings account. He is engaged and plans to get married next year and also plans to retire at age 65. He is facing a dilemma of whether to buy a house or a condo—whichever one will be a better investment for him.
Decision-Making Process CondoHouse $300,000 Down Payment (10%) Appreciation (8% per annum) Down Payment (10%) Association Fees $150/month Appreciation (6% per annum) Closing Cost (0.33%) Closing Cost (0.33%)
Scenario #1 Purchasing a House Description Address: 447 E ADAIR ST Long Beach, CA 90805 Price: $300,000 Living space: 1,102 Sq. Ft Estimated payment: $1,579 Per Month Single Family Property Area: Long Beach; North Long Beach County: Los Angeles Single family style
More Detailed Information On The House 2 car garage Detached garage Concrete block Tile roof Yard(s) on property Lot is 2925 sq. ft. High School District: LONG BEACH UNIFIED SCHOOL DISTRICT Formal dining room Living room Approximately 1102 sq. ft Single level Year built: 1977 3 total bedroom(s) 2.00 total bath(s)
Scenario #2 Purchasing a Condo Description Address: 3721 COUNTRY CLUB DR Unit: 15 Long Beach, CA 90807 Price: $300,000 1,120 Sq. Ft Association fees are $150 mo. Estimated payment: $1,579 Per Month Area: Long Beach; Bixby Knolls County: Los Angeles Condo style Single level
More Detailed Information On The Condo Dining area Approximately 1120 sq. ft. Parking space(s): 2 2.00 total bath(s) Year built: 1974 3 total bedroom(s) Composition roof In-ground swimming pool Community clubhouse(s) Community sauna/steam room(s) Patio Master bedroom 2 car garage
Assumptions HouseCondo Purchase Price$300,000 Down Payment(10%)$30,000 Closing Cost(0.33%)$2,137$1,773 Loan Amount$270,000 Monthly Payment Maintenance5% of yearly payment2% of yearly payment Taxes1.25% of market price Insurance0.3% of loan amount Association Fee0$150/month Appreciation8% per annum6% annually
Cash Flow Diagram House (in 10 years) Payment Property Taxes Maintenance Insurance AAAAAAAAAA Present Value FV $300,000 $647,677 $17,393 Closing Costs $2,137 $3,750 $810 $870
Conclusion Summary Table of the Best Choice Alternatives HouseCondo ROR16.34%6.78%
Recommendations To sell the house after 10 years to gain the most Rate of Return on the asset. Buy the house, not the condo, because of higher percentage of ROR. Wait until marriage so that more income can be generated for a better house in a better location. Rent instead of buying. Analyze the Rate of Return in 10 years and decide whether to liquidate or not. Wait until the appreciation goes up then sell it.
Sources Used Internet Book: Newnan,D.G, Essentials of Engineering Economic Analysis Dr.Rosenkrantz