EGR 403 Project II

1
EGR 403 Project II
Buying A House
vs.
Buying A Condo
Team 12 Lala Garabidian...(Organizer) Pha
t Bao(Organizer) Samuel Mangampo..(Techi
e)
Mark Mckinney..(Summarizer)

2
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 condowhichever one will be a better
  investment for him.

3
Decision-Making Process
Condo
House
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
4
Scenario 1Purchasing 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
•          

5
More Detailed InformationOn 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)      

6
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

7
More Detailed InformationOn 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

8
Assumptions
9
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
10
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
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Sensitivity Analysis
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Sensitivity Analysis continued
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Graph I House
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Graph II Condo
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Graph III Appreciation Analysis
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Graph IVBest Alternative
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Graph VBest Alternative
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Conclusion
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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.

20
Sources Used

• Internet
• Book Newnan,D.G, Essentials of Engineering
  Economic Analysis
  
• Dr.Rosenkrantz