Question
An apartment requires an investment of $ 12,500,000. The building has 40 units. You expect the maintenance to be $270,000 the first year plus some
An apartment requires an investment of $ 12,500,000. The building has 40 units. You expect the maintenance to be $270,000 the first year plus some additional costs of $ 80,000. The maintenance costs are expected to increase by $50,000 each subsequent year while the additional costs would remain the same. After 5 years of operation, the apartment building can be sold at $ 15,000,000. What is the annual rent per apartment unit that will provide a return on investment of 15% (MARR) after tax? Assume the building to be fully occupied during the five years. Assume the tax rate to be 40% and capital gains tax rate of 17.5%. Building has a CCA of 4% and would be sold at the end of year 5. Show all the calculations and print out the excel sheet, if used.
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