Group 6: Buying vs Building a houseBuilding LotHouseMethodologyAssumptionsCash Flow DiagramsSensitivity AnalysisSensitivity Analysis (cont)Slide 9ResourcesConclusionGroup 6: Buying vs Building a houseGroup members: Organizer Anna Bullara Techies Tri Truong Richard Morrow Summarizers Almautaz Rahman Eugene PyuBuilding LotLocation: City of MonroviaLot size: 6,500 sqft Price: $ 160,000Cost to build: Avg $150/ squarefootUpgrade: $50,000-> $100,000HouseLocation: City of MonroviaHouse size: 2400 sqftLot size: 6500 sqft4 Bedrooms 3 bathroomsPrice: $800,000MethodologyComparing 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.AssumptionsInflation: 3%Property Tax increase: 2% per yearInsurance increase: 2% per yearInterest rate: 6%MARR: 7%Appreciation: 5%Cash Flow DiagramsResaleMaintenanceInsuranceProperty taxI=3%I=2%I=2%MARR = 7%Appreciation: 5%Monthly PaymentDown Paymentn = 120Sensitivity AnalysisMARR: 7%Adjustment: + 0.5%Result: Buying a house is more profitable.Sensitivity Analysis (cont)Appreciation value: 5%Adjustment: + 0.5%Result: Buying a house is more desirable.Sensitivity Analysis (cont)Appraised value: $620,000 -> $800,000Result: Building a house is more favorable when the house is appraised at $780,000 or higher.ResourcesInternet www.imrmls.comwww.century21.comwww.bankrate.comReal estate agentsGeneral contractorsConclusionThrough 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
View Full Document
Unlocking...