1 / 10

Team #4 When to Buy A House

Team #4 When to Buy A House. Stephen Tran- Organizer Shake Babakhanyan- Techie Paige Lewis- Summarizer. Buyer Description. 23 year old single engineering Starting salary of $60,000 Save 10% of income every year Want to buy a $500,000 house

hammett-bentley
Download Presentation

Team #4 When to Buy A House

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. Team #4When to Buy A House Stephen Tran- Organizer Shake Babakhanyan- Techie Paige Lewis- Summarizer

  2. Buyer Description • 23 year old single engineering • Starting salary of $60,000 • Save 10% of income every year • Want to buy a $500,000 house • Renting an apartment for $1000/mo. (including utilities).

  3. Project Constants • Pay off house in 35 years • 6% interest on mortgage loan • 3% inflation rate • 6% investment rate • $5,000 first year maintenance cost on home • $1,000 annual maintenance cost

  4. Project Scenarios • Scenario 1 • Rent an apartment for 5 years • Pay off the mortgage in 30 years • Scenario 2 • Rent an apartment for 10 years • Pay off the mortgage in 25 years

  5. Our Goal • Choose scenario with the least PV of cost

  6. Scenario 1 Rent Buy Home Annual Savings Annual Tax Benefit=$8,100 N=30 N=5 Rent, utilities, renters insurance with 3% Gradient P= $37,874.31 Mortgage payments, utilities, maintenance, homeowners insurance with 3% Gradient

  7. Scenario 2 Rent Buy Home Annual Savings Annual Tax Benefit=$8,100 N=25 N=10 P= $101,368.74 Mortgage payments, utilities, maintenance, homeowners insurance with 3% Gradient Rent, utilities, renters insurance with 3% Gradient

  8. Results • Lower PV of costs for Scenario 2 • Renting for 10 years is more beneficial • Save more money for down payment • Pay less on monthly mortgage payments

  9. Sensitivity Analysis • Scenario 1 is more effective if savings were doubled to 20% of income • Inflation rate caused the most significant change • Raise rate has little effect on savings and present value

  10. Resources • Personal experience • Market prices from internet sources • Textbook

More Related