Question

Felice bought a duplex apartment at a cost of $150,000. Her mortgage payments on the property are $940 per month. 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. Ignore income taxes, changes in equity value, and changes in property value.

What monthly rent must she charge for each apartment to make $2,000 in profit each year?

Answer 1

Total expense of Duplex apartment for a year = Mortgage ($940*12 months) + real estate taxes ($1440) + insurance costs ($900) + maintenance (1000 * 2 apartments)

= 11280 + 1440 + 900 +2000

= 15620

Total profit = rental income of apartments - Total expense of Duplex apartment for a year

[ 2 apartments * $2000] = rental income - 15620

$4000 = rental income - 15620

rental income = 19620 (annual)

Monthly = $1635

Monthly rent must she charge for each apartment to make $2,000 in profit each year is $817.5 for each apartment