Team 1- Personal Investing Low-Income vs. High-Income Real EstateScenariosPomonaClaremontAssumptionsResults and ComparisonsSensitivity Analysis FindingsSlide 8Slide 9ReferencesTeam 1- Personal InvestingTeam 1- Personal InvestingLow-Income vs. High-Low-Income vs. High-Income Real EstateIncome Real EstateAndrew DunnAndrew DunnJeff WeintraubJeff WeintraubSilvio TovarSilvio TovarAdrian HernandezAdrian HernandezScenariosScenarios►Around $750,000-800,000 to investAround $750,000-800,000 to investBuy-out home at time of purchaseBuy-out home at time of purchaseNo mortgageNo mortgage30-year period30-year period►2 specific locations to compare in L.A. 2 specific locations to compare in L.A. CountyCountyPomona- low-income area to investPomona- low-income area to investClaremont- high-income area to investClaremont- high-income area to investPomonaPomona►1,068 sq.ft. house1,068 sq.ft. house►7298 sq.ft lot7298 sq.ft lot►Contemporary style- 3 bedrooms, 2 Contemporary style- 3 bedrooms, 2 bathrooms, 1-car garagebathrooms, 1-car garage►$299,750$299,750►Investment equivalent to 3 of these Investment equivalent to 3 of these homeshomesClaremontClaremont►2276 sq.ft. house2276 sq.ft. house►15310 sq.ft. lot15310 sq.ft. lot►Foothills home- 4 bedrooms, 3 Foothills home- 4 bedrooms, 3 bathrooms, attached 3 car garage, bathrooms, attached 3 car garage, family room with fireplace and bar, 2 family room with fireplace and bar, 2 patios, RV parking, laundry roompatios, RV parking, laundry room►$775,000$775,000AssumptionsAssumptions►PomonaPomona$1500 rent per month for each home$1500 rent per month for each home$2000 per year on maintenance/repair for each home$2000 per year on maintenance/repair for each home3% inflation3% inflation1% property tax from purchase price1% property tax from purchase price$1000 yearly home insurance per home$1000 yearly home insurance per home6.34% home appreciation (national average from 1968-2004)6.34% home appreciation (national average from 1968-2004)►ClaremontClaremont$2000 rent per month$2000 rent per month$4000 per year on maintenance/repair$4000 per year on maintenance/repair3% inflation3% inflation1% property tax from purchase price1% property tax from purchase price$2300 yearly home insurance$2300 yearly home insurance6.34% home appreciation (national average from 1968-2004)6.34% home appreciation (national average from 1968-2004)Results and ComparisonsResults and Comparisons►PomonaPomona$5,685,650.05 final $5,685,650.05 final sale value for homessale value for homesRoR= 9.71%RoR= 9.71%►ClaremontClaremont$4,900,059.82 final $4,900,059.82 final sale value for homesale value for homeRoR= 7.59%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.Sensitivity Analysis FindingsSensitivity Analysis Findings►Pomona RentPomona Rent►Claremont RentClaremont RentSensitivity Analysis FindingsSensitivity Analysis FindingsAs 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.Sensitivity Analysis FindingsSensitivity Analysis FindingsAs Appreciation of homes goes up then our Rate of Return obviously goes up for both
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