Ted and Alice's House Decision

Constants 2013
Non-Housing Living Expenses (Cars, Food, Medical, etc) NA
Mortgage Amount for Home Purchase NA
Real Estate Taxes and Insurance on Home NA
Utilities Expense (Heat and Electric)--Apartment NA
Utilities Expense (Heat, Car, Water and Trash)--House NA
House Repair amd Maintenance Expenses NA

Inputs 2013
Rental Occupancy (H=High, L=Low) NA
First Time Buyer Bond Loans Available (Y=Yes, N=No) NA

Summary of Key Results 2013

End-of-year Cash on Hand (Rent) NA
End-of-year Cash on Hand (Buy) NA

Calculations 2013
Apartment Rent $ 14,400
House Payments NA
Interest Rate for House Mortgage 6%

Income and Cash Flow Statement (Continue to Rent) 2013

Beginning-of-year Cash on Hand NA
Ted's Take Home Wages $ 24,000
Alice's Take Home Salary $ 30,000
Total Take Home Income $ 54,000
Apartment Rent NA
Utilities (Apartment) NA
Non-Housing Living Expenses NA
Total Expenses NA
End-of-year Cash on Hand $ 4,000

Income and Cash Flow Statement (Purchase House) 2013

Beginning-of-year Cash on Hand NA
Ted's Take Home Wages $ 24,000
Alice's Take Home Salary $ 30,000
Total Take Home Income $ 54,000
House Payments NA
Real Estate Taxes and Insurance NA
Utilities (House) NA
House Repair and Maintenance Expense NA
Non-Housing Living Expenses NA
Total Expenses NA
End-of-year Cash on Hand $ 4,000
ecision

2014 2015
$ 36,000 $ 39,000
$ 200,000 NA
$ 3,000 $ 3,150
$ 2,000 $ 2,200
$ 2,500 $ 2,600
$ 1,200 $ 1,400

2014 2015
L NA
N NA

2014 2015
$ 6,548 $ 6,868
$ 2,291 $ (1,452)

2014 2015
$ 14,832 $ 15,277
$ 14,389 $ 14,389
NA NA

2014 2015
$ 4,000 $ 6,548
$ 24,480 $ 24,970
$ 30,900 $ 31,827
$ 55,380 $ 56,797
$ 14,832 $ 15,277
$ 2,000 $ 2,200
$ 36,000 $ 39,000
$ 52,832 $ 56,477
$ 6,548 $ 6,868

2014 2015
$ 4,000 $ 2,291
$ 24,480 $ 24,970
$ 30,900 $ 31,827
$ 55,380 $ 56,797
$ 14,389 $ 14,389
$ 3,000 $ 3,150
$ 2,500 $ 2,600
$ 1,200 $ 1,400
$ 36,000 $ 39,000
$ 57,089 $ 60,539
$ 2,291 $ (1,452)
 Scenario Summary: Ted and A

Changing Cells:
Rental Occupancy (H=High, L=Low) $C$12
First Time Buyer Bond Loans Available (Y=Yes, N=No) $C$13
Result Cells:
End-of-Year Cash on Hand (Rent) $D$16
End-of-Year Cash on Hand (Buy) $D$17

End-of-Y
$8,000

$7,000

$6,000

$5,000

$4,000

$3,000

$2,000

$1,000

$0
Low Occupancy-Bond Money
Unavailable
($1,000)
Low Occupancy-Bond
High Occupancy-Bond M
($2,000) High Occupancy-Bond
 Scenario Summary: Ted and Alice's House Purchase Decision-2014
High Occupancy-Bond Money Available High Occupancy-Bond Money Unavailable

H H
Y N

$3,713 $3,713
$7,090 ($1,452)

End-of-Year Cash on hand (2015)

Low Occupancy-Bond Money L

Unavailable
Low Occupancy-Bond Money Available L
High Occupancy-Bond Money Unavailable H
High Occupancy-Bond Money Available H
ecision-2014
Low Occupancy-Bond Money Available Low Occupancy-Bond Money Unavailable

L L
Y N

$6,868 $6,868
$7,090 ($1,452)

nd (2015)

Rent Buy

L
H
H
 End-of-Year Cash on hand (20
$8,000
Regarding Ted and Alice's decision to pur
a house in 2015, I would recommend them
$7,090 to go with the decision. The senario mana
$7,090
$7,000 $6,868
and chart provide evidence that supports t
conclusion. Buying house showed more r
$6,000 terms of cash on hand at the end of year 2
than continuing to rent the apartment. The
couple will face negative cash on hand ($
$5,000
at the end of the year if they chose to buy
house now. They will face positive cash if
$4,000 $3,713 $3,713 rent the place, which are $3,713 and $6,8
respectively. Even if the bond money is
$3,000 available in case of low rental occupancy,
looks like buying a house might be profit
but the chances of having the highest cash
$2,000
hand in that case is very low. Therefore, I
Ted and Alice should not purchase the ho
$1,000 now.

$0
Low Occupancy-Bond
Money Unavailable
($1,000)
Low Occupancy-Bond Money Available
High Occupancy-Bond
($1,452) Money Unavailable
($2,000) High Occupancy-Bond Money Available
ar Cash on hand (2015)
Ted and Alice's decision to purchase
015, I would recommend them not
he decision. The senario manager
$7,090
$6,868 $6,868
ovide evidence that supports this
Buying house showed more risk in
h on hand at the end of year 2015
uing to rent the apartment. The
face negative cash on hand ($1452)
f the year if they chose to buy a
They will face positive cash if they
ce, which are $3,713 and $6,868 Rent
. Even if the bond money is
case of low rental occupancy, and it Buy
uying a house might be profitable
nces of having the highest cash on
case is very low. Therefore, I think
ce should not purchase the house

nd Money Available L
d Money Unavailable H($1,452)
nd Money Available H