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Group 6: Buying vs Building a house PowerPoint PPT Presentation


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Group 6: Buying vs Building a house. Group members: Organizer Anna Bullara Techies Tri Truong Richard Morrow Summarizers Almautaz Rahman Eugene Pyu. Building Lot. Location: City of Monrovia Lot size: 6,500 sqft Price: $ 160,000

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Group 6: Buying vs Building a house

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Group 6 buying vs building a house l.jpg

Group 6: Buying vs Building a house

Group members:

Organizer Anna Bullara

Techies Tri Truong

Richard Morrow

Summarizers Almautaz Rahman

Eugene Pyu


Building lot l.jpg

Building Lot

  • Location: City of Monrovia

  • Lot size: 6,500 sqft

  • Price: $ 160,000

  • Cost to build: Avg $150/ squarefoot

  • Upgrade: $50,000-> $100,000


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House

  • Location: City of Monrovia

  • House size: 2400 sqft

  • Lot size: 6500 sqft

  • 4 Bedrooms

  • 3 bathrooms

  • Price: $800,000


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Methodology

  • Comparing between the cost of building a house from scratch and buying an already-built house in the same location.

  • Comparing which one will yield a better profit when selling in 10 years. The rate of inflation of 3% will be considered in our calculations.


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Assumptions

  • Inflation: 3%

  • Property Tax increase: 2% per year

  • Insurance increase: 2% per year

  • Interest rate: 6%

  • MARR: 7%

  • Appreciation: 5%


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Cash Flow Diagrams

Resale

MARR = 7%

Appreciation: 5%

n = 120

Monthly Payment

Down Payment

I=3%

Maintenance

I=2%

Insurance

I=2%

Property tax


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Sensitivity Analysis

  • MARR: 7%

  • Adjustment: + 0.5%

  • Result: Buying a house is more profitable.


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Sensitivity Analysis (cont)

  • Appreciation value: 5%

  • Adjustment: + 0.5%

  • Result: Buying a house is more desirable.


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Sensitivity Analysis (cont)

  • Appraised value: $620,000 -> $800,000

  • Result: Building a house is more favorable when the house is appraised at $780,000 or higher.


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Resources

  • Internet

    • www.imrmls.com

    • www.century21.com

    • www.bankrate.com

  • Real estate agents

  • General contractors


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Conclusion

  • Through the use of all the resources stated previously, we were able to do a thorough sensitivity analysis.

  • With the sensitivity techniques that we used, we’ve found that 2 out of the 3 analysis indicated that buying a house is more profitable.


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