Question 1

Henry Murray has a second home which he rents for most of the year. It is a holiday flat in Cornwall. The property is rented for 2,100 per month, but is not rented for the month of January.

The expenses for the period the flat is rented are shown below:

Agents fees	5% of the rent, charged monthly even if not rented
Water rates	70 for eight months of the year
Maintenance charge	180 quarterly
Sundry repairs during the year	420, washing machine & replacement keys
Insurance on the property	380 per annum
Cleaner	30/week for 48 weeks
Interest at 4.15% on 180,000 mortgage. The mortgage payments are 622.5/month.

Required:

1. Produce a schedule for Henry showing how much net rental income he will need to include on his tax return.
2. When Henry originally bought the property he paid 230,000 (50,000 deposit and 180,000 on mortgage). It is now worth 315,000. Calculate the ROI (Return on the Investment) for Henry so that he can compare it with the return he is getting on his shares.