Question

felice bought a duplex apartment at a cost of $145,000. her mortgage payments on the property are $1,490 per month, $629 of which can be deducted from her income taxes. her real estate taxes total $1,620 per year, and insurance costs $1,104 per year. she estimates that she will spend $1,398 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

To break even, Felice must charge a monthly rent of $602.75 for each apartment.

Step-by-step explanation:

To break even, the total expenses for the duplex apartment must be covered by the rental income.

The annual expenses for the property are:

• Real estate taxes: $1,620
• Insurance: $1,104
• Maintenance: $1,398

So, the total annual expenses are $1,620 + $1,104 + $1,398 = $4,122.

The mortgage payment consists of two parts: the portion that can be deducted from income taxes and the remaining amount. The deductible portion is $629 per month, which means it reduces Felice's taxable income. The remaining amount is $1,490 - $629 = $861 per month.

The annual mortgage payment is $861 x 12 = $10,332.

Hence, the total annual expenses, including the mortgage payment, are $4,122 + $10,332 = $14,454.

To calculate the monthly rent needed to break even, divide the total annual expenses by the number of apartments (2 in this case) and then divide by 12 to get the monthly rent per apartment: $14,454 / 2 / 12 = $602.75.

Therefore, Felice must charge a monthly rent of $602.75 for each apartment to break even.