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

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

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

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.

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

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

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

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

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.

Resources Internet Real estate agents General contractors

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.