Realestate:

A couple, got married and found jobs in LA County.

They have decided to purchase their first home or condominium, since they recently received a $50,000 family inheritance. In addition, the annual appreciation in the market is right now 6% per year and is anticipated to stay that way in the foreseeable future.

They both have a gross annual income of $180,000. However, they both have student loans and their minimum monthly payments are $1,000 per month EACH. They have budgeted the following expenses. - Utilities (water, trash, gas, electricity) at $500 per month - HOA at $250 per month - Cell phones, telephone, cable tv, etc. - $250 per month

- Two car payments, car insurance, gas gasoline at $950 EACH. - Based upon their existing spending, they will need about $2,500 total for food, groceries, clothing, travel, etc.

- Homeowners insurance is estimated at $1,080 per year.

- Property taxes are estimated at 1.25% of the purchase price of the condominium / house They qualify for a mortgage program which requires a minimum down payment of 10% of the purchase price; this program has a mortgage interest rate of 3.75%, amortized over 30 years.

What is the purchase price of the condominium / house they can afford ? If they sell the condominium at the end of year 5, how much did their equity increase by?

* Assuming no sale commissions and no closing costs. please show your work / calculations.