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Jason buys 5 rent houses at $60,000 each. He uses his $60,000 in cash as a 20% down payment and borrows $240,000 from Simmons Bank.
Jason buys 5 rent houses at $60,000 each. He uses his $60,000 in cash as a 20% down payment and borrows $240,000 from Simmons Bank. The net rent is used to pay off the loan over 15 years. At the end of the 15 years, Jason plans to sell the houses and put the cash into an account at Simmons Bank to pay for his son's college and establish a nest egg for retirement. The inflation rate is 2.5%. The houses increase in value with the inflation rate. When he sells the houses, he pays a 20% capital gains tax on the fully depreciated value of the houses. Ignore costs associated with the purchase and sale of the houses (title insurance, survey, closing fees, realtor commission, depreciation recapture taxes, etc.). What is the expected value of Option B after Jason sells the houses and pays his taxes in 15 years? (Show how you calculate the value)
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