Question

Beatriz Cruz purchased a home for $98,500. She made a $28,500

down payment and mortgaged the rest. Her annual expenses
for mortgage interest, taxes, repairs, insurance, and depreciation
totaled $6,890. She rented the house for $750 a month.
a. What is the annual net income?
b. What is the annual yield?
e. What monthly rent would she have to charge to get
a yield of 90%?

Answer 1

a. To find the annual net income, subtract the annual expenses from the annual rental income.

The annual rental income = $750 * 12 months = $9,000

So, the annual net income = $9,000 - $6,890 = $2,110

b. To find the annual yield, divide the annual net income by the investment cost (the down payment) and multiply by 100 to get the answer as a percentage.

The annual yield = ($2,110 / $28,500) * 100 = 7.41%

c. To find the monthly rent required to get a yield of 90%, divide the investment cost by the desired yield and divide by 12 to get the monthly rent.

The investment cost = $28,500

The desired yield = 0.90

So, the monthly rent = ($28,500 / 0.90) / 12 = $2,306.25

Explanation: