1. EGR403-01 Buy and Sell Now VS. Save and Buy later Team 7 Mark Ruffin Gerard Reyes Steven Corral William Tamae

2. Project Scenarios Scenario One Scenario One Sell a paid-off house and use that money to help pay for a new house. Sell a paid-off house and use that money to help pay for a new house. Scenario Two Scenario Two Stay in the paid-off house for ten years and use the money saved as a down payment for a new house. Stay in the paid-off house for ten years and use the money saved as a down payment for a new house.

3. Scenario Constants and Buyer Description Sell off the house in 10 years in either scenario Sell off the house in 10 years in either scenario Both houses appreciate Both houses appreciate Current House Current House 3 bedroom (1500 sq. ft.) 2 car garage 3 bedroom (1500 sq. ft.) 2 car garage New House New House $750,000 $750,000 30 year loan 30 year loan The Buyer: 40 year old Engineering Graduate 40 year old Engineering Graduate Salary of $90,000 Salary of $90,000 Looking to buy $750,000 house Looking to buy $750,000 house Pomona Resident Pomona Resident

4. Goal At 7% interest on the mortgage, which is the better option? At 7% interest on the mortgage, which is the better option?

5. Sensitivity Analysis 1 New and Old House Sensitivity Analysis 1 New and Old House Appreciation Less than 21% → NPW of Scenario A < NPW of Scenario B Less than 21% → NPW of Scenario A < NPW of Scenario B → NPW of Scenario A > NPW of Scenario B ≥ 21% → NPW of Scenario A > NPW of Scenario B Appreciation rate Scenario A PWScenario B PW 3%$385,620.76$60,691.97 21.0%$385,620.76$390,780.98

6. Sensitivity Analysis 2 At Different Mortgage Rates NPW of Scenario B > NPW of Scenario A regardless of rate. NPW of Scenario B > NPW of Scenario A regardless of rate. Mortgage RateScenario A NPWScenario B NPW 0.00%-$303,505.06$87,915.33 0.50%-$311,151.92$113,484.35 1.00%-$318,480.09$140,293.25 3.00%-$344,844.49$259,666.82 4.00%-$356,413.47$326,314.36 5.00%-$367,016.61$397,254.99 7.00%-$385,620.76$550,681.64

7. Sensitivity Analysis 3

8. Sensitivity Analysis 4

9. Sensitivity Analysis 3 and 4 Results For the Different Loan Amounts For the Different Loan Amounts Scenario A resulted in a high NPW with a loan of $40,000 but with increasing loan amounts Scenario B resulted in a higher NPW’s. Scenario A resulted in a high NPW with a loan of $40,000 but with increasing loan amounts Scenario B resulted in a higher NPW’s. For Different Prices for a New House For Different Prices for a New House Scenario B always provided a higher NPW and it is also noted that as time went on, Scenario B’s NPW increased while Scenario A’s NPW decreased. Scenario B always provided a higher NPW and it is also noted that as time went on, Scenario B’s NPW increased while Scenario A’s NPW decreased.

10. Sensitivity Analysis 5 When A catches up to B! Based on our scenarios, we concluded that it would take approximately 58 years for the NPW of Scenario A to be equivalent to the NPW of Scenario B. Based on our scenarios, we concluded that it would take approximately 58 years for the NPW of Scenario A to be equivalent to the NPW of Scenario B.

11. Conclusion In most cases, the NPW of Scenario B was always higher than Scenario A. In most cases, the NPW of Scenario B was always higher than Scenario A. Therefore, Staying at home and saving proves to be the better alternative. Therefore, Staying at home and saving proves to be the better alternative.Sources: www.Bankrate.com www.Bankrate.com www.Bankrate.com www.mymoney.gov/homeownerships.html (Home Equity and Buying information…) www.mymoney.gov/homeownerships.html (Home Equity and Buying information…) www.mymoney.gov/homeownerships.html