This research assessed the investment potential of a selected residential property. The assessment determined through net present value analysis that the property was feasible investment. A further analysis determined that the required investor annual income to support a mortgage on the property was $323.640.
The initial purposes of this research are to (1) select a private residence that currently is on the market and (2) assess the potential of the property as a real estate investment. The last purpose of this research is to assess the affordability of the residence as an investment from the perspective of an individual investor.
The process for this research began with a determination of the geographic area in which the search for a potential residence would occur. The decision was to search for a residence in Los Angeles County, California. Within Los Angeles County, the limits of the search area were the boundaries of the contiguous area including Burbank, Glendale, and Pasadena.
The residential search process occurred online through the property search services offered by Realtor.com (2002) at that organization's Web site. Limitations on the property search were as follows:
The initial search produced 47 property listings. Analyses of these property listings resulted in the selection of the property at 2186 Las Lunas Street, Pasadena, California.
The objective of the next search conducted was to establish rental incomes in the area of the property selected. The conduct of this search also occurred through the Realtor.com Web site.
The analytical process included determinations of probably costs and revenues applicable to the selected property. These data are necessary to establish projected cash flows. Net present value (NPV) analysis determined the feasibility of the proposed investment. The final element of the process was a determination of the income level required for an investor to afford a mort...