Question
Mr. Bailey has approached you regarding an opportunity he has to become a homeowner. Mr. Bailey has asked you to perform a financial analysis to
Mr. Bailey has approached you regarding an opportunity he has to become a homeowner. Mr. Bailey has asked you to perform a financial analysis to determine if this would be a wise move to purchase the new condominium, or if he should continue to rent. You will create an Excel spreadsheet and a written Word document to explain the results for Mr. Bailey.
Currently he rents a downtown condominium for $2500 per month. A neighboring unit has recently gone onto the market for $500,000. Mr. Bailey feels that this would make a great investment for him and it would make sense to stop renting and purchase this unit. Mr. Bailey can put down 20% on the new unit. He will assume a 30-year mortgage for the condominium with a 6% APR. Mr. Bailey plans to remain in the condominium for 5 years and then sell and move to suburban Berkshire Farms.
Financial Details If Mr. Bailey purchases the condo, he will have additional monthly fees of:
$1000 HOA fee (maintenance, pool, health club) $300 property taxes $100 repairs
You have reviewed real estate trends and have determined that over 5 years the condo will appreciate approximately 3% per year. When he sells the condo, you estimate that he will pay 5% in commission and an additional $2,000 in closing costs.
show Excel formulas:
- Mortgage payment with costs to Buy versus Rent (Sheet 1)
- Amortization Schedule for the mortgage (Sheet 2)
- Present value of the proceeds if he were to sell the property in 5 years (Sheet 3)
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