Team #4 When to Buy A HouseBuyer DescriptionProject ConstantsProject ScenariosOur GoalScenario 1Scenario 2ResultsSensitivity AnalysisSlide 10ResourcesTeam #4When to Buy A HouseStephen Tran- OrganizerShake Babakhanyan- TechiePaige Lewis- SummarizerBuyer Description23 year old single engineeringStarting salary of $60,000Save 10% of income every yearWant to buy a $500,000 houseRenting an apartment for $1000/mo. (including utilities).Project ConstantsPay off house in 35 years 6% interest on mortgage loan3% inflation rate6% investment rate$5,000 first year maintenance cost on home$1,000 annual maintenance costProject ScenariosScenario 1Rent an apartment for 5 years Pay off the mortgage in 30 yearsScenario 2Rent an apartment for 10 years Pay off the mortgage in 25 yearsOur GoalChoose scenario with the least PV of costScenario 1N=5RentN=30P= $37,874.31Annual Tax Benefit=$8,100Buy HomeAnnual SavingsRent, utilities, renters insurance with 3% GradientMortgage payments, utilities, maintenance, homeowners insurance with 3% GradientScenario 2Annual SavingsN=10Rent Buy HomeN=25P= $101,368.74Annual Tax Benefit=$8,100Rent, utilities, renters insurance with 3% GradientMortgage payments, utilities, maintenance, homeowners insurance with 3% GradientResultsLower PV of costs for Scenario 2$610,803 to $510,049Renting for 10 years is more beneficialSave more money for down paymentPay less on monthly mortgage paymentsSensitivity AnalysisSensitivity AnalysisScenario 1 is more effective if savings were doubled to 20% of incomeInflation rate caused the most significant changeRaise rate has little effect on savings and present valueResourcesPersonal experienceMarket prices from internet
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