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Cost Benefit Analysis of Purchasing a Newly Constructed Suburban Home vs. Urban Fixer-Upper

Cost Benefit Analysis of Purchasing a Newly Constructed Suburban Home vs. Urban Fixer-Upper. Team 4 Members: Scott Tatman (Team Leader) Carmen Ivanescu (Organizer) David Sacilotto (Organizer) Veronica Holliday (Organizer) Bo Xu (Organizer). Scenario . Family of four – Parents and 2 kids

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Cost Benefit Analysis of Purchasing a Newly Constructed Suburban Home vs. Urban Fixer-Upper

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  1. Cost Benefit Analysis of Purchasing aNewly Constructed Suburban Home vs. Urban Fixer-Upper Team 4 Members: Scott Tatman (Team Leader) Carmen Ivanescu (Organizer) David Sacilotto (Organizer) Veronica Holliday (Organizer) Bo Xu (Organizer)

  2. Scenario • Family of four – Parents and 2 kids • Both kids are entering high school • Family comparing two different purchase options for a home • What are the associated costs? • Which option will yield a greater benefit after five years when the kids are in college? • What are some of the intangible benefits of either option?

  3. Option 1 – Urban Fixer-Upper • Locations are Los Angeles area. • Older 1910-1940 houses. • Home Loan Information • $450,000 Home Cost • 20% Down • 30 year loan • 6% Mortgage rate • Needs major house improvements. • Labor/Construction costs. • Materials. • Building Permits. • Intangible Benefits • Employment opportunities. • Entertainment/recreation. • Sense of community. • Crime/Safety Statistics. • School District.

  4. Option 2 – Newly Constructed Suburban Home • Locations are Walnut, Diamond Bar, Chino Hills areas. • Newly constructed 1990-2004 houses. • Home Loan Information • $450,000 Home Cost • 20% Down • 30 year loan • 6% Mortgage Rate • Invests money that would otherwise be spent on repairs • Secondary Costs • Backyard and Garden costs. • Intangible Benefits • Employment opportunities. • Entertainment/recreation. • Sense of community. • Crime/Safety Statistics. • School District.

  5. Resources • Internet Sites • Mortgage Info • Average home appreciation for areas under consideration • Average rates of return for various investment options • Average repair costs and rates of return for home improvements • “Essentials of Engineering Economic Analysis Second Edition,” by Newnan, Lavelle, and Eschenbach • All formulas and functions for analysis

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