Question

A real estate developer specializes in residential apartments. A complex of 20 run- down apartments has recently come on the market for $1,524,500. The developer predicts that after remodeling, the 12 one-bedroom units will rent for $875 per month and the 8 two- bedroom apartments for $1,250. The developer budgets 20% of the rental fees for repairs and maintenance. It should be 30 years before the apartments need remolding again, if the work is done well, remodeling costs are $25,000 per apartment. Both purchase price and remodeling costs qualify as 27.5-year MACRS property. Assume that the MACRS schedule assigns an equal amount of depreciation to each of the first 27 years and one-half year to year 28.

Answer 1

The subject of this question is Business. The real estate developer is analyzing the financial aspects of purchasing and remodeling a complex of run-down apartments.

Step-by-step explanation:

The subject of this question is Business. The real estate developer is analyzing the financial aspects of purchasing and remodeling a complex of run-down apartments.

To calculate the total cost of purchasing the apartments, the developer multiplies the number of units by their respective rental fees and subtracts the budgeted amount for repairs and maintenance. After determining the purchase price, the developer needs to consider the depreciation of the property over time and the future costs of remodeling.

Based on the information provided, the developer can calculate the expected financial returns from rental income, consider the annual depreciation expenses, and budget for the future remodeling costs.