### What is the minimum annual rate of property appreciation

##### Reference no: EM13967657

The purpose of this project is to answer the question of whether you should buy or rent a home in a particular metropolitan area. You will be working on this assignment in a group of three to five students. The assignment is due on or before february 5th at 11:55 p.m. Est. By that time you should submit an electronic copy (via email to: of your assignment. If you turn your assignment late, 10% will be deducted from your grade for every calendar-day delay.

Before you begin working on this project, one representative from each group must email me with the names of the group members and i will assign you a city for your analysis.

Your complete assignment should read and look like a professional report and include the following sections:

2. Description of the subject properties: you will identify three properties on zillow in your assigned city, for which both price "zestimate" and rent "zestimate" are available. All three properties must be located in the same city or metropolitan area. You should briefly describe the properties and include basic relevant information about the properties as well as a picture or two of each of the three properties.

3. Purchase and rent prices assumptions: for analysis purposes you should assume that you can buy a home in your assigned city for the average "zestimate" price of three properties you selected. Similarly, you should assume that you can rent a home in that city for the average rent "zestimate" price of the three properties you selected.

Please note: while we know that the "zestimates" provided by zillow are not always accurate, it is above the scope of this project to challenge their "zestimates". Therefore, in this project you should accept the "zestimates" as given.

4. Setting and assumptions: create an excel spreadsheet that compares buying a property in the city of your choice to renting a similar property. Your excel spreadsheet should include the following assumptions:

- Inflation expectation: a fair estimation (must be justified in the text).
- Purchase price: your average purchase price from part 3.
- Initial rent: your average rent price from part 3.
- Rental growth rate: a reasonable estimation for the area (must be justified in the text).

- Property appreciation: first estimate what is a reasonable rate of appreciation for your area over the long run and then arrive with reasonable assumption for a reasonable rate of appreciation over the medium term (6 years) (must be justified in the text).

- Insurance: a reasonable assumption for the area (must be justified in the text).

- Maintenance: a reasonable assumption (must be justified in the text). Here you should also consider dues charged, if any, by the building or neighborhood association.

- Expense growth: equals to your property appreciation rate.

- Marginal tax rate: 25%

- Property tax: a reasonable assumption for the area (must be justified in the text).

- Down payment: 20%

- Loan amount: 80%

- Interest rate: current market rate for individuals with high credit score.

- Mortgage initiation fee: a reasonable assumption (must be justified in the text).

- Loan type: fixed rate 30-year (cpm)

- Payment: calculated accordingly

- Holding period: 6 years

- Selling expenses: 6.50%

- Investment opportunity: a reasonable assumption (must be justified in the text).

A. Should you (or a person with similar expectation to yours) buy or rent a property in the area you explored?

B. If you were to buy the average property you considered, what would be your imputed rent? In other words, how much would it cost you per month to live in your own home?

C. At what price you would need to purchase the average property in order to be indifferent between buying and renting?

D. What is the minimum annual rate of property appreciation on the average property in order to be better off buying than renting? Do you think that this rate of appreciation is reasonable?

E. What annual rate of property appreciation should you expect on the average property in order for the imputed rent to be zero? Do you think that this expectation is reasonable?

6. Discussion and summary: this section will include a brief discussion of your buy vs. Rent analysis and a conclusion that summarizes your findings.

Verified Expert

This report is being prepared in order to decide whether the client should purchase a home or take the home on rent in a particular metropolitan area. The net cash outflows from both renting the home and purchasing the home are compared in order to arrive at an effective decision. Please find the attached word and excel file.

#### Desirable and costly parts of any organizations costs

Benefits are one of the most desirable and costly parts of any organizations costs. Some benefits are mandated by law and allorganiazationsmustprobidethem to all their empl

#### What is the present worth of project

Margaret has a project with \$28,000 first cost that returns \$5,000 per year over 10-year life. It has a salvage value of \$3,000 at the end of 10 years. If the MARR is 15%,

#### Financing cash flows to the operating section?

Given that regard less of the classification of the cash flows the result is the same with respect to the amount of change in cash flows during the designated period what mo

#### Cause of the seizure was not determined

Patient was admitted to the hospital after having a seizure at work. The admitting diagnosis was to rule out epilepsy. After testing was performed, the cause of the seizure

Assume the form of your new business will be a partnership (if you have not already done so). Discuss the types of conflicts that may arise and how you could prevent them

#### Normalize trade and travel relations with cuba

You have undoubtedly aware of the progress to normalize trade and travel relations with Cuba, and the resumption of diplomatic relations and the opening of respective embass

#### What are some of internal weaknesses of your organization

What are some of your internal strengths of your organization? What are some of your internal weaknesses of your organization? What are some of your external threats? What are

#### Probability distribution on an appropriate set

Model the situation by specifying a probability distribution on an appropriate set of type pro?les and calculate each player's beliefs about their opponents' types condition