1. Team 1- Personal Investing Low-Income vs. High- Income Real Estate Andrew Dunn Jeff Weintraub Silvio Tovar Adrian Hernandez

2. Scenarios ► Around $750,000-800,000 to invest  Buy-out home at time of purchase  No mortgage  30-year period ► 2 specific locations to compare in L.A. County  Pomona- low-income area to invest  Claremont- high-income area to invest

3. Pomona ► 1,068 sq.ft. house ► 7298 sq.ft lot ► Contemporary style- 3 bedrooms, 2 bathrooms, 1-car garage ► $299,750 ► Investment equivalent to 3 of these homes

4. Claremont ► 2276 sq.ft. house ► 15310 sq.ft. lot ► Foothills home- 4 bedrooms, 3 bathrooms, attached 3 car garage, family room with fireplace and bar, 2 patios, RV parking, laundry room ► $775,000

5. Assumptions ► Pomona  $1500 rent per month for each home  $2000 per year on maintenance/repair for each home  3% inflation  1% property tax from purchase price  $1000 yearly home insurance per home  6.34% home appreciation (national average from 1968-2004) ► Claremont  $2000 rent per month  $4000 per year on maintenance/repair  3% inflation  1% property tax from purchase price  $2300 yearly home insurance  6.34% home appreciation (national average from 1968-2004)

6. Results and Comparisons ► Pomona  $5,685,650.05 final sale value for homes  RoR= 9.71% ► Claremont  $4,900,059.82 final sale value for home  RoR= 7.59% Since the Incremental RoR of 26% is greater than our MARR of 5% we choose the higher cost of alternative: Pomona houses. Rate of Return analysis used to compare projects.

7. Sensitivity Analysis Findings ► Pomona Rent ► Claremont Rent

8. Sensitivity Analysis Findings As inflation increases, so does the RoR. This is due to only 2 factors being affected by inflation : rent and maintenance. When greater inflation is applied, rent increases more than maintenance because of the big difference in value and is shown as a positive gain in the cashflow.

9. Sensitivity Analysis Findings As Appreciation of homes goes up then our Rate of Return obviously goes up for both investments.

10. References ► http://www.homes.com http://www.homes.com ► http://homes.realtor.com/ http://homes.realtor.com/ ► http://www.realestateabc.com/insights/appr eciation.htm http://www.realestateabc.com/insights/appr eciation.htm http://www.realestateabc.com/insights/appr eciation.htm ► http://www.invest- 2win.com/appreciation.html http://www.invest- 2win.com/appreciation.html http://www.invest- 2win.com/appreciation.html ► http://interactive.web.insurance.ca.gov/surv ey/survey?type=homeowners http://interactive.web.insurance.ca.gov/surv ey/survey?type=homeowners http://interactive.web.insurance.ca.gov/surv ey/survey?type=homeowners