Question

Art Neuner, an investor in real estate, bought an office condominium. The market value of the condo was $250,000 with a 70% assessment rate. Art feels that his return should be 12% per month on his investment after all expenses. The tax rate is $31.50 per $1,000. Art estimates it will cost $275 per month to cover general repairs, insurance, and so on. He pays a $140 condo fee per month. All utilities and heat are the responsibility of the tenant. Calculate the monthly rent for Art. (Round your intermediate calculations and final answer to the nearest cent.) Monthly rent:

Answer 1

Answer :-

Here we need to findout the monthly rent for Art .

Montly rent for Art = Return on the investment + Total monthly expenses  

Where,

Return on the investment = 250,000 * 12%

= $30,000

Return on the investment = $30,000

Total monthly expenses = [ Tax + General expenses per annum + Condo fees per annum ] / 12

Where ,

Tax   = [ [ 250,000 * 70% ] * $31.50 ] / 1,000

= [175,000 * $31.50 ] / 1,000

= 5,512,500 / 1,000

= $5,512.50

Tax = $5,512.50

Total monthly expenses = [ $5,512.50 + [ $275 * 12 months ] + [ $140 * 12 months ] ] / 12

= [ $5,512.50 + 3,300 + 1,680 ] / 12

= 10,492.5 / 12

= $874.375

Total monthly expenses = $874.375

Finally ,

Montly rent for Art = $30,000 + $874.375

= 30,874.375

= $30,874

Montly rent for Art = $30,874