Thea buys a house for $250,000, rents it for two years for $1,000 per month, and sells it at the end of those two years for $300,000. Thea's per-year rate of return is

Question

Quizplus · Accepted Answer

Thea's total profit includes both the rental income and the profit from selling the house. Rental income over two years is $1,000 * 24 months = $24,000. The profit from selling the house is $300,000 - $250,000 = $50,000. So, the total profit is $24,000 + $50,000 = $74,000. The initial investment was $250,000. The per-year rate of return is calculated as (Total Profit / Initial Investment) / Number of Years * 100 = ($74,000 / $250,000) / 2 * 100 = 14.8 percent.

Thea Buys a House for $250,000, Rents It for Two