Question

You own a house that you rent for $1,500 per month. The maintenance expenses on the house average $280 per month. The house cost $235,000 when you purchased it 4 years ago. A recent appraisal on the house valued it at $257,000. If you sell the house you will incur $20,560 in real estate fees. The annual property taxes are $3,300. You are deciding whether to sell the house or convert it for your own use as a professional office. What value should you place on this house when analyzing the option of using it as a professional office?

Answer 1

$236,440

Explanation:

Relevant data provided

Current market value of house = $257,000

Real estate fees = $20,560

The computation of net cash flow from sale if sold is shown below:-

Net cash flow from sale if sold = Current market value of house - Real estate fees

= $257,000 - $20,560

= $236,440

Therefore for computing the net cash flow from sale if sold we simply deduct the real estate fees from current market value of house.