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House vs. Condo Investment: Making the Right Choice

This project compares the financial aspects of buying a house and buying a condo. It analyzes factors like down payment, appreciation, closing costs, and association fees to determine which investment option will yield a higher return on investment. Recommendations are provided based on the analysis.

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House vs. Condo Investment: Making the Right Choice

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  1. 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)

  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 condo—whichever one will be a better investment for him.

  3. 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

  4. 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

  5. 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

  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. 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

  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

  11. Sensitivity Analysis

  12. Sensitivity Analysis continued…

  13. Graph IHouse

  14. Graph IICondo

  15. Graph IIIAppreciation Analysis

  16. Graph IVBest Alternative

  17. Graph VBest Alternative

  18. Conclusion

  19. 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

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