Question

Felice bought a duplex apartment at a cost of $155,000. her mortgage payments on the property are $1,370 per month, $638 of which can be deducted from her income taxes. her real estate taxes total $1,728 per year, and insurance costs $1,368 per year. she estimates that she will spend $1,500 each year per apartment for maintenance, replacing appliances, and other costs. the tenants will pay for all utilities. what monthly rent must she charge for each apartment to break even?

Answer 1

Felice needs to charge $620 per month for each apartment to cover her monthly costs and break even.

Step-by-step explanation:

To calculate the monthly rent Felice must charge for each apartment to break even, we need to consider her mortgage payments, income tax deduction, real estate taxes, insurance costs, and maintenance costs. Felice's monthly mortgage payment is $1,370, but she gets a deduction of $638 from her income taxes, effectively making her cost $732 per month. Her annual real estate taxes are $1,728, which is $144 per month ($1,728 ÷ 12 months). The annual insurance cost is $1,368, or $114 per month.

Maintenance costs are $1,500 per year, per apartment, which is $125 per apartment per month. Adding all these expenses for one month: $732 (adjusted mortgage) + $144 (taxes) + $114 (insurance) + ($125 x 2) (maintenance for both apartments), the total monthly cost is $1,240. Since there are two apartments, this cost must be divided by two. Hence, Felice must charge $620 per month, for each apartment to break even.