1. Armin J Bogosian - Techie Aida Beltran - Summarizer Isaac Miranda - Techie Tanya Cardona - Organizer Team #4

2.  25 year old graduate from Cal Poly  Mechanical Engineer  Starting salary $70,000  Salary increases 3% every year  Has liquid assets for down payment  Considering a 10 year period  Location: Brea

3.  SFR  1,300 s.f., 3 bed, 2 bath  Purchase Price: $350,000  Down Payment: 3% or $10,500  Interest Rate: 5.5%  Loan Type  FHA with MIP (mortgage insurance)  30 year fix  Lender, Bank of America  Annual Taxes: $4,576.32  Annual Insurance: $800 Monthly Payment with Taxes, Insurance, and MIP: $2,500  Apartment  1245 s.f., 2 bedroom, 2 bath  $1,000 security deposit  Annual rent increase of 3% Monthly payment: $2,000

4. Buying  End of year refund received from house deductions is put away into a savings account compounded at 4%.  Appreciation is assumed to increase at 3% per year. (based on historical average appreciation rate) Leasing  Every month, $500 is put away into a savings account compounded at 4%.  Inflation/rent increases are 3%

7.  How low does inflation rate have to go where rent makes better sense?

8. Scenario 1:  In 5 years or less: renting is the better option  In 5 years or more: buying is the better option Scenario 2:  Renting: Available $ amount to put into savings decreases as payments increase  Buying: Tax deduction increases as your monthly payment goes up (as a result of interest write off)

9. Scenario 3:  At 1% inflation rate, renting makes better sense- UNREALISTIC  2% inflation rate or higher, buying is the better option

10.  Our calculations proved renting to be more financially beneficial over a 10 year period.  If, however you take into consideration the equity that is accumulated in our buying situation, then buying is obviously the better choice.  Equity is not considered a “liquid” asset until the property is sold or refinanced.

11.  Office of Federal Housing Enterprise Oversight- historical appreciation rate: http://www.ofheo.gov/ http://www.ofheo.gov/  Current Interest Rates: www.bankrate.com  FHA-home loan information: www.hud.gov/www.hud.gov/  Wescom Credit Union- CD rates: www.wescom.org/ www.wescom.org/