Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Scenario..... 3 bedroom, 2 bathroom home with 2 car garage in a desirable neighborhood. Market says that comparable homes in good condition sell for $160,000.You

Scenario.....

3 bedroom, 2 bathroom home with 2 car garage in a desirable neighborhood.

Market says that comparable homes in good condition sell for $160,000.You have examined the home and believe that it will need extensive work to make the kitchen and bathrooms current.It needs a new roof and other typical work.That often includes cleaning, painting, and flooring.You estimate that you will spend 3 months and $45,000 on the house, doing some work yourself.Your investment goals for real estate are a minimum of 18% of sales price as profit.You will use a real estate agentthat charges 5% commission.Assume that this is your only closing cost.You will be using cash.

- What is the most that you should pay for the house?

- If you rent the house you would take out a loan at 5% for 20 years.You will borrow at 75% loan to market value.How much rent would you have to charge to break even each month to cover your mortgage payment plus $200 per month in expenses?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamentals of Financial Management

Authors: Eugene F. Brigham, ‎ Joel F. Houston

11th edition

324422870, 324422873, 978-0324302691

More Books

Students also viewed these Finance questions