Cost Benefit Analysis of Purchasing a Newly Constructed Suburban Home vs. Urban FixerUpper

1
Cost Benefit Analysis of Purchasing a Newly
Constructed Suburban Home vs. Urban Fixer-Upper

• Team 4 Members
• Scott Tatman (Team Leader)
• Carmen Ivanescu (Organizer)
• David Sacilotto (Organizer)
• Veronica Holliday (Organizer)
• Bo Xu (Organizer)

2
Scenario

• Family of four Parents and 2 kids
• Both kids are entering high school
• Family comparing two different purchase options
  for a home
• What are the associated costs?
• Which option will yield a greater benefit after
  five years when the kids are in college?
• What are some of the intangible benefits of
  either option?

3
Option 1 Urban Fixer-Upper

• Locations are Los Angeles area.
• Older 1910-1940 houses.
• Home Loan Information
• 450,000 Home Cost
• 20 Down
• 30 year loan
• 6 Mortgage rate
• Needs major house improvements.
• Labor/Construction costs.
• Materials.
• Building Permits.
• Intangible Benefits
• Employment opportunities.
• Entertainment/recreation.
• Sense of community.
• Crime/Safety Statistics.
• School District.

4
Option 2 Newly Constructed Suburban Home

• Locations are Walnut, Diamond Bar, Chino Hills
  areas.
• Newly constructed 1990-2004 houses.
• Home Loan Information
• 450,000 Home Cost
• 20 Down
• 30 year loan
• 6 Mortgage Rate
• Invests money that would otherwise be spent on
  repairs
• Secondary Costs
• Backyard and Garden costs.
• Intangible Benefits
• Employment opportunities.
• Entertainment/recreation.
• Sense of community.
• Crime/Safety Statistics.
• School District.

5
Resources

• Internet Sites
• Mortgage Info
• Average home appreciation for areas under
  consideration
• Average rates of return for various investment
  options
• Average repair costs and rates of return for home
  improvements
• Essentials of Engineering Economic Analysis
  Second Edition, by Newnan, Lavelle, and
  Eschenbach
• All formulas and functions for analysis