Question
Below is the exact information from problem 123 in Topic 13 Renting versus Buying. *** Jennifer is choosing between buying a condominium property and renting
Below is the exact information from problem 123 in Topic 13 Renting versus Buying.
***
Jennifer is choosing between buying a condominium property and renting it. The price for the condo is $157,000. The financing terms for the purchased condo are: LTV = 0.9, loan term = 30 years, interest rate = 5.75%, monthly payments. If the condo is purchased, it is subject to immediate closing costs of $9,420. Further, projected property taxes are $2,400 per year, monthly association fee is $160. If Jennifer decides to sell the purchased condo at some point of time in the future, such sale will be subject to the agents commission of 7 percent. If a similar condo is rented instead, the current rent is $1,184.59 per month. If instead of buying a condo Jennifer chooses to rent, she will invest money that otherwise would have been spent on condo into stock market. Assume that stock market yields 9 percent annual return. Compute the profit/loss of buying versus renting for different periods of time spent in the purchased condo until it is sold for two different scenarios of the condos price appreciation: a) Worst case, when annual price increase is 2.5 percent; b) Best case, when annual price increase is 7.5 percent.
***
Which of the following changes for problem 123 will result in a HIGHER profit of buying versus renting?
I. Closing costs are $10,500 instead.
II. Annual property taxes are $3,600 instead.
III. Real estate agent charges 4% of selling price as his commission instead.
A. | I only | |
B. | II only | |
C. | III only | |
D. | I and II only | |
E. | I and III only | |
F. | II and III only | |
G. | All three |
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