You are considering constructing a luxury apartment building project that requires an investment of $15,500,000. The building has 50 units. You expect the maintenance cost for the apartment building to be $350,000 the first year and $400,000 the second year, after which it will continue to increase by $50,000 in subsequent years. The cost to hire a manager for the building is estimated to be $85,000 per year. After five years of operation, the apartment building can be sold for $17,000,000.

What is the annual rent per apartment unit that will provide a return on investment of 15% after tax?

Assume that the building will remain fully occupied during the five years.

INSTRUCTIONS

how to do this in Excel file, to show the investment and cost payouts during the 5 years of the project.

Enter the resale value as an income in year 5

Calculate the Annual Equivalent of the cash amounts above, to determine the annual rental income needed to break even on the project, with a discount rate of 15%