1 / 11

Buying vs. Building a House: Profit & Profitability Analysis

This project compares costs, profitability, and resale potential of building vs buying a house with a focus on a specific location. Sensitivity and cash flow analyses were conducted, indicating buying might be more profitable in the long run. Valuable online resources and local contacts were utilized for research.

edwardthomas
Download Presentation

Buying vs. Building a House: Profit & Profitability Analysis

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Group 6: Buying vs Building a house Group members: Organizer Anna Bullara Techies Tri Truong Richard Morrow Summarizers Almautaz Rahman Eugene Pyu

  2. Building Lot • Location: City of Monrovia • Lot size: 6,500 sqft • Price: $ 160,000 • Cost to build: Avg $150/ squarefoot • Upgrade: $50,000-> $100,000

  3. House • Location: City of Monrovia • House size: 2400 sqft • Lot size: 6500 sqft • 4 Bedrooms • 3 bathrooms • Price: $800,000

  4. Methodology • Comparing 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.

  5. Assumptions • Inflation: 3% • Property Tax increase: 2% per year • Insurance increase: 2% per year • Interest rate: 6% • MARR: 7% • Appreciation: 5%

  6. Cash Flow Diagrams Resale MARR = 7% Appreciation: 5% n = 120 Monthly Payment Down Payment I=3% Maintenance I=2% Insurance I=2% Property tax

  7. Sensitivity Analysis • MARR: 7% • Adjustment: + 0.5% • Result: Buying a house is more profitable.

  8. Sensitivity Analysis (cont) • Appreciation value: 5% • Adjustment: + 0.5% • Result: Buying a house is more desirable.

  9. Sensitivity Analysis (cont) • Appraised value: $620,000 -> $800,000 • Result: Building a house is more favorable when the house is appraised at $780,000 or higher.

  10. Resources • Internet • www.imrmls.com • www.century21.com • www.bankrate.com • Real estate agents • General contractors

  11. Conclusion • Through 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 profitable.

More Related