Renovating a Foreclosed Property versus

Buying Prime Real-estate

Jonathan Lee,Jimmy Luong,Vincent Rodriguez, Bryan Vine

Team #5

Scenario # 1: Foreclosed Property 4 bedroom 2 bathroom 1,770 ft2

7800 ft2 lot size

Land $40,340

$121,290 Improvements

Assessed Total $161,720

Transaction Value $150,000

Scenario # 1: Interior/Basic Repairs

New Floor (tile, carpet combined) $8500 New Interior Paint $2000 New Fixtures $3,000 Damaged Walls $1000 Window Repairs $1000

Total (Internal Repairs) $15,500

Scenario # 1: External/Extreme Repairs

Roofing $4,000 to $8,000 New Windows $4,000 Landscaping $5,000 Exterior Paint $2,500 Central Heating $4,000 Kitchen Remodeling $10,000

Total (Worse Case) $33,500 Grand Total (Internal + External) $49,000

Scenario 1: Purchasing Price

Best Case / Worst Case

Assessed Total $161,720 / $161,720 Auction discount -$85,712 / -$30,727

(53% / 19% )

Purchase Price $76,008 / $130,993 Basic Improvements $15,500 / $49,000

Total $81,508 / $179,993

Scenario # 2: Premium Property

4 bedroom 2 bathroom 1,787 ft2

Property Value $359,900

Scenario 1 Best: Cash Flows

1st Mortgage @ 7.5% = -$8,455/year2nd Mortgage @ 7.5% = -$1,724/yearRent (4 rooms @ $325) = $18,000/yearAppreciation @ 2.5% = $4,043/yearTotal Cash Flow = $7,820/year

Sale Profit at 3 years = $12,129Sale Profit at 5 years = $20,215Sale Profit at 30 years = $121,290

Scenario 1 Worst: Cash Flows

1st Mortgage @ 7.5% = -$14,571/year2nd Mortgage @ 7.5% = -$5,451/yearRent (4 rooms @ $325) = $18,000/yearAppreciation @ 2.5% = $4,043/yearTotal Cash Flow = -$2,023/year

Sale Profit at 3 years = $12,129Sale Profit at 5 years = $20,215Sale Profit at 30 years = $121,290

Scenario 2: Cash Flows

Mortgage @ 5.5% = -$24,522/yearRent (4 rooms @ $325) = $18,000/yearAppreciation @ 2.5% = $8,998/yearTotal Cash Flow = -$6,521.64/year

Sale Profit at 3 years = $26,993Sale Profit at 5 years = $44,988Sale Profit at 30 years = $269,925

Future Value at 3 years

Scenario 1 Best Profit: $34,591ROR: -----

Scenario 1 Worst Profit: $6,061ROR: 79%

Scenario 2 Profit: $7,428ROR: 34%

Future Value at 5 years

Scenario 1 Best Profit: $59,318ROR: -----

Scenario 1 Worst Profit: $10,102ROR: 35%

Scenario 2 Profit: $12,379ROR: 16%

Future Value at 30 years

Scenario 1 Best Profit: $508,600ROR: -----

Scenario 1 Worst Profit: $360,951ROR: 17%

Scenario 2 Profit: $74,276ROR: -----