An investor is considering the purchase of a residential rental property that has an asking price of $400,000. The property has four rental units that are expected to rent for $1,200 each per month. Operating expenses and vacancy allowances are expected to be 45% of gross income. An 5% interest only mortgage loan is available for 5 years at 100% of the purchase price. How much cash income will the investor receive each month of the first year after paying the monthly mortgage payment

The answer is $973

Explanation:

Solution

Given that:

A residential rental property asking price = $400,000

Property expected to rent = $1200

Operating expenses expected = 45%

Interest =5%

Mortgage loan available for =5 years

Purchase price =100%

Now, we find out the cash income the investor receive each month of the first year after paying the monthly mortgage payment

Thus

Rental income (1200*4 units)=$4800

Less: operating expenses (4800*45%)=$2160

The Net income per month=$2640

So,

Less:Monthly mortgage interest payment=$1667 [(400000*5%)

=20000/12=1667]

The Cash income =$973

Therefore the investor will receive $973 each month of the first year.

1   all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know