Team 1 — Personal Investing Low-Income vs High

Team 1 - Personal Investing Low-Income vs. High. Income Real Estate Andrew Dunn Jeff Weintraub Silvio Tovar Adrian Hernandez

Scenarios ► Around $750, 000 -800, 000 to invest § Buy-out home at time of purchase § No mortgage § 30 -year period ► 2 specific locations to compare in L. A. County § Pomona- low-income area to invest § Claremont- high-income area to invest

Pomona ► 1, 068 sq. ft. house ► 7298 sq. ft lot ► Contemporary style- 3 bedrooms, 2 bathrooms, 1 -car garage ► $299, 750 ► Investment equivalent to 3 of these homes

Claremont ► 2276 sq. ft. house ► 15310 sq. ft. lot ► Foothills home- 4 bedrooms, 3 bathrooms, attached 3 car garage, family room with fireplace and bar, 2 patios, RV parking, laundry room ► $775, 000

► Pomona Assumptions § § § ► $1500 rent per month for each home $2000 per year on maintenance/repair for each home 3% inflation 1% property tax from purchase price $1000 yearly home insurance per home 6. 34% home appreciation (national average from 1968 -2004) § § § $2000 rent per month $4000 per year on maintenance/repair 3% inflation 1% property tax from purchase price $2300 yearly home insurance 6. 34% home appreciation (national average from 1968 -2004) Claremont

Results and Comparisons ► Pomona § $5, 685, 650. 05 final sale value for homes § Ro. R= 9. 71% ► Claremont § $4, 900, 059. 82 final sale value for home § Ro. R= 7. 59% Rate of Return analysis used to compare projects. Since the Incremental Ro. R of 26% is greater than our MARR of 5% we choose the higher cost of alternative: Pomona houses.

Sensitivity Analysis Findings ► Pomona ► Claremont Rent

Sensitivity Analysis Findings As inflation increases, so does the Ro. R. This is due to only 2 factors being affected by inflation : rent and maintenance. When greater inflation is applied, rent increases more than maintenance because of the big difference in value and is shown as a positive gain in the cashflow.

Sensitivity Analysis Findings As Appreciation of homes goes up then our Rate of Return obviously goes up for both investments.

References ► http: //www. homes. com ► http: //homes. realtor. com/ ► http: //www. realestateabc. com/insights/appr eciation. htm ► http: //www. invest 2 win. com/appreciation. html ► http: //interactive. web. insurance. ca. gov/surv ey/survey? type=homeowners