Question 2 Fred Murray has just received a legacy of 90,000 from his aunt. He is considering buying a property costing 310,000 in Reading for rental purposes. He will use his legacy as a deposit but will need to borrow the remaining amount for the purchase. He has found a mortgage provider who have offered him an interest-only mortgage at 5.45% interest. The arrangement fee for the mortgage is 1,100. Local agents have estimated that the monthly rent may be 1,300 per month, with 10% of rent charged as agent's fees for managing the property. Other costs are estimated as follows: Repairs and maintenance per annum Insurance per annum Estimated other monthly costs 1,995 405 45 1. Outline for Fred the advantages of owning rental property and the disadvantages and potential risks. (5 marks) 2. Calculate the net annual income that Fred could expect from his property, shown as a schedule. [Marks will be lost if you do not use the recommended layout.] (8 marks) 3. Calculate the potential return on his investment (ROI). (2 marks) 4. Calculate the potential return on his investment next year if the property increases in value to 350,000 but the rental income stays the same. (2 marks)