Question

Jenny bought a rental property for $1,000,000 and leased it for 24 months. Rents will be collected at the beginning of each month and the residual value after 24 months will be $800,000. To earn 24% rate of return per year on this lease, how much rent/month should be charged? Please show your work.

Answer 1

Property purchased price = $1,000,000

Residual Value after 24 months = $800,000

Total earning 24% per year = ($1,000,000 - $800,000)*(24%) = $48,000

Return for 24 months = $48,000*2 = $96,000

Total Rent should charged for 24 months ; $200,000 + $96,000 = $296,000

Per month Rent = $296,000/24 = $12,333

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