Abstract
Real estate is one of the investments, whose returns are quite promising. It is termed as one of the businesses one can invest into and be guaranteed on good returns. Most of the investors, purchase houses and later resell them after they have appreciated. One can purchase a house for different uses, for commercial purposes or as a private residence. Private residences are normally bought permanently while for commercial one can lease for a while and later make a purchase. On our case we are going to concentrate on private residence, whose purpose is for settlement of family in the future.
Description of purpose
Before we would acquire the house, we had to consider many factors. The factors include the location of the house: the house had to be located in a place secure and convenient in terms of accessibility, the size of the house: which size is the home needed to house a family or other people. Which type of house was needed a mansionate or a bungalow. After establishing the type and the size, we estimate the value of the house. Every investment bears a risk and one has to take it, the analysis of the cost was taken into consideration. The decision made was be final and would not subject the buyer into post purchase dissonance. This state of mind may make the buyer make a poor decision hence the presence of the agents would help in making the right decisions.
Statement of process
The most important aspect before purchasing a private residence is the cost generated from it. We were to analyze the ability to buy before making any step. The income analysis was narrowed down and computed in monthly basis. If the amount to be paid in a monthly basis is exceeds a certain percentage then we should consider a further analysis of the income generated.
The best analysis is taken from the advice sought from the real estate investment experts. The experts enabled us to calculate the cost of the house. From our monthly income we were able to make a decision. The decision made would enable us derive the satisfaction based in our ability to buy. The experts, with the help of the real estate agents enabled us to make the decision from the advices given.
The income generated enabled us to choose the type and size of the house we needed. The house which we choose was enough for our family members and extra rooms for visitors. In the purchase one should also establish what they need. The size how many squire feet or which is the location of the house. Another most important aspect is the terms of purchase in the mortgage taken. Which include fixed or adjustable rate. The duration can take up to 30 years, the rates have their advantages and disadvantages which should not overlooked. The decision made depends on the financial power of the owner and also the cash flows made.
The next step is the process of making a transaction; the payment is done as agreed. The payments include the cost of the house, taxes, insurance and the commission made to the agent. The payments made are obtained from the research made and also the advice given by the experts. The moving cash flows are to be established and allocated to each year. Most of the information is obtained from the internet websites. The schedules and the graphs are determined from the costs of the house. They are calculated by the real estate finance experts. Also by the help of the agents a proper house estimate is brought about. The decision made is always justified and satisfies the buyer.
Presentation and Discussion of the results
Before knowing the amount to be paid, we have to calculate the annual salary to establish the monthly salary.
From the above computations we can establish the average annual salary which is, $34933. This can be divided by 12 to establish the monthly salary. This is information that was obtained from the real estate finance experts.
$34933/12 we get a monthly salary of $2911. The monthly payment should not exceed a third of the salary which is 1/3 by $2911 which is equal to $970. This amount should not be exceeded in the payment of the mortgage.
Our next step is to find the house that we need. In this situation, the agent is highly deeded. Their work is to help us establish a home that fits our needs, taste and preferences, and most importantly the budget that we came up with. The agents in their knowledge were able to know what we really wanted. From this they came up with a list of houses which we were to choose from.
Later on we were able to choose a house whose value was $190000. The following information gives a description and an illustration of the house we choose. Our decision was on a fixed mortgage of 30%.
The following information represents the house details.
1030 E 2nd ST. Unit, long Beach, CA
After an analytical evaluation, we decided to purchase the house. This is for the reason that the house was affordable to us and it was not built in the late early years. The house had accessibility and its location favored security. The house was built not far from a fire station which would reduce the risk of loss at the incident of fire. This is also an advantage because the insurance premiums to be paid were reduced.
The table below shows the cash flows made in the payment of the house.
The home was in an ideal location in which future investments would be done. We had an option of selling the house in later stages; this is after its appreciation and the rise in demand. We decided to go on a mortgage of 20% down payment of $38000 with an interest rate of 3.875% and of a property tax rate of 1.25%.
Our next step is to make the purchase, the urgent was an experienced person and he had guided us into the purchase of the house and from the advice am pleased to say that the decision made is satisfiable. The payments made include, a monthly insurance premium of $48, agent s commission and down payment for the purchase of the house. The final cost is calculated and the transaction made. Among the payments are principal interest rate of $ 714, property tax of $197 and the home insurance cost of $48. The payments are made but the following show schedule for the payment in year one.
The insurance cost was estimated by the location of the house in terms of nearness to the fire station and the accessibility. The size of the house and the cost of the house, the data was obtained from an online website where the insurer made the calculations. There were many insurance options in which we had to choose from. The best in terms of compensation conditions was taken to enable the process. For instance during the online research we were able to find some of the insurance agencies like, Gupta insurance financial agencies.
The rate of tax was determined by the research which was conducted in the state of Los Angeles. We visited the tax offices and we were able to determine the tax amount of the house from its cost. The tax cost and the insurance cost add up to the cost of the house.
The mortgage payments over the 30 years are calculated and they add up to $ 257,313 the following graph show the principal and interest given and estimated within the years of mortgage payments.
Y-axis Payment in $
X-axis Years
With the help of the web in the websites such as move.com, doorsteps.com and realtor.com, we were able to research and come up with the house for purchase. This was aided by the private investment agents who gave advice and helped us choose among the houses.
The real estate financing experts enabled us to calculate the cost of the house, and establish the cash flows. The amortization schedule is drawn and also the graph which showed the principal and the interest paid within the life of the house payment.
We wish to also appreciate the effort made by the involved parties. Over the years we have had a feeling of post purchase dissonance but we have made all the possible efforts to eliminate it. These include the practice of doing research before making any purchase. Knowing what I want before making the final decision, asking all the possible primary and secondary questions before purchasing any product. Lastly prioritizing needs, this is where by needs that are essential are satisfied first.
Purchasing a private residence is a risk which most of the people find it hard to undertake. It was because of the advices we got and the urge to own a home, which made us make the important step in our lives. The home has a larger compound in which we are planning to add a swimming pool for our refreshments. The compound is also ideal, for poultry farming, my colleague has the passion to own some chicken and from the home he can make it possible. We plan to make the farming commercial and make it large scale.
We were given information that the rate of appreciation for the house is quite high. This is one of the factors which motivated us into making the decision. Los Angeles is a state whose urban growth rate is higher, for this reason we wouldn’t make the purchase in the future due to a higher increase in the price of homes.
