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Team 1- Personal Investing Low-Income vs. High-Income Real Estate

Team 1- Personal Investing Low-Income vs. High-Income Real Estate. Andrew Dunn Jeff Weintraub Silvio Tovar Adrian Hernandez. Scenarios. Around $750,000-800,000 to invest Buy-out home at time of purchase No mortgage 30-year period 2 specific locations to compare in L.A. County

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Team 1- Personal Investing Low-Income vs. High-Income Real Estate

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  1. Team 1- Personal InvestingLow-Income vs. High-Income Real Estate Andrew Dunn Jeff Weintraub Silvio Tovar Adrian Hernandez

  2. Scenarios • Around $750,000-800,000 to invest • Buy-out home at time of purchase • No mortgage • 30-year period • 2 specific locations to compare in L.A. County • Pomona- low-income area to invest • Claremont- high-income area to invest

  3. Pomona • 1,068 sq.ft. house • 7298 sq.ft lot • Contemporary style- 3 bedrooms, 2 bathrooms, 1-car garage • $299,750 • Investment equivalent to 3 of these homes

  4. Claremont • 2276 sq.ft. house • 15310 sq.ft. lot • Foothills home- 4 bedrooms, 3 bathrooms, attached 3 car garage, family room with fireplace and bar, 2 patios, RV parking, laundry room • $775,000

  5. Assumptions • Pomona • $1500 rent per month for each home • $2000 per year on maintenance/repair for each home • 3% inflation • 1% property tax from purchase price • $1000 yearly home insurance per home • 6.34% home appreciation (national average from 1968-2004) • Claremont • $2000 rent per month • $4000 per year on maintenance/repair • 3% inflation • 1% property tax from purchase price • $2300 yearly home insurance • 6.34% home appreciation (national average from 1968-2004)

  6. Pomona $5,685,650.05 final sale value for homes RoR= 9.71% Claremont $4,900,059.82 final sale value for home RoR= 7.59% Results and Comparisons Rate of Return analysis used to compare projects. Since the Incremental RoR of 26% is greater than our MARR of 5% we choose the higher cost of alternative: Pomona houses.

  7. Pomona Rent Claremont Rent Sensitivity Analysis Findings

  8. Sensitivity Analysis Findings As 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.

  9. Sensitivity Analysis Findings As Appreciation of homes goes up then our Rate of Return obviously goes up for both investments.

  10. References • http://www.homes.com • http://homes.realtor.com/ • http://www.realestateabc.com/insights/appreciation.htm • http://www.invest-2win.com/appreciation.html • http://interactive.web.insurance.ca.gov/survey/survey?type=homeowners

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