Question

Felice bought a duplex apartment at a cost of $150,000. Her mortgage payments on the property are $940 per month, $121 of which can be deducted from her income taxes. Her real estate taxes total $1,440 per year, and insurance costs $900 per year. She estimates that she will spend $1,000 each year per apartment for maintenance, replacing appliances, and other costs. The tenants will pay for all utilities 0.83 points 0142:40 What monthly rent must she charge for each apartment to break even? (Round intermediate calculations and answer to the nearest whole number.

Answer 1

$651

Explanation:

For computation of Break-even monthly rent per apartment first we need to find out the monthly rent which is shown below:-

Monthly costs = Mortgage payment + Real estate taxes + Insurance costs + Maintenance costs

= $940 + ($1,440 ÷ 12) + ($900 ÷ 12) + (2 × ($1,000 ÷ 12)

= $940 + $120 + $75 + $167

= $1,302

Break-even monthly rent per apartment = Monthly costs ÷ 2

= $1,302 ÷ 2

= $651

Therefore we have applied the above formula.

We ignored the income tax as it is not relevant also it is tax deductible expense