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Buying A House. EGR 403 – Project II. vs. Buying A Condo. Team 12 Lala Garabidian……...( Organizer ) Phat Bao………………( Organizer ) Samuel Mangampo……..( Techie ) Mark Mckinney……..( Summarizer ). Scenario.

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EGR 403 – Project II

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Egr 403 project ii

Buying A House

EGR 403 – Project II

vs.

Buying A Condo

Team 12

Lala Garabidian……...(Organizer)

Phat Bao………………(Organizer)

Samuel Mangampo……..(Techie)

Mark Mckinney……..(Summarizer)


Scenario

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.


Egr 403 project ii

Decision-Making Process

House

Condo

$300,000

$300,000

Down Payment

(10%)

Down Payment

(10%)

Appreciation

(8% per annum)

Appreciation

(6% per annum)

Closing Cost

(0.33%)

Closing Cost

(0.33%)

Association Fees

$150/month


Scenario 1 purchasing a house

Description

Address: 447 E ADAIR STLong 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

Scenario #1Purchasing a House


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)

More Detailed InformationOn The House


Scenario 2 purchasing a condo

Scenario #2Purchasing 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

More Detailed InformationOn The Condo


Assumptions

Assumptions


Egr 403 project ii

Cash Flow Diagram

House (in 10 years)

$647,677

FV

Closing Costs

$2,137

Payment

$17,393

Property Taxes

$3,750

Insurance

$810

Maintenance

$870

A

A

A

A

A

A

A

A

A

A

Present Value

$300,000


Egr 403 project ii

Cash Flow Diagram

Condo (in 10 years)

$537,254

FV

Closing Costs

$1,773

Payment

$17,393

Property Taxes

$3,750

Insurance

$810

Maintenance

$348

A

A

A

A

A

A

A

A

A

A

Present Value

$300,000


Egr 403 project ii

Sensitivity Analysis


Egr 403 project ii

Sensitivity Analysis continued…


Graph i house

Graph IHouse


Graph ii condo

Graph IICondo


Graph iii appreciation analysis

Graph IIIAppreciation Analysis


Graph iv best alternative

Graph IVBest Alternative


Graph v best alternative

Graph VBest Alternative


Conclusion

Conclusion


Recommendations

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

Sources Used

  • Internet

  • Book: Newnan,D.G, Essentials of Engineering Economic Analysis

  • Dr.Rosenkrantz


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