Maria is looking to buy one of two houses to rent out for additional income.She determines that the first house,priced at $200,000,could rent for $1,500 per month.If the second house is priced at $280,000,how much rent would Maria have to charge to get an equivalent yearly rate of return?

Question

Quizplus · Accepted Answer

To find the equivalent yearly rate of return, calculate the annual return for the first house: $1,500 x 12 = $18,000. The rate of return is $18,000 / $200,000 = 0.09 or 9%. For the second house, to achieve the same 9% return: 0.09 x $280,000 = $25,200 annually. Monthly rent needed is $25,200 / 12 = $2,100.

Maria Is Looking to Buy One of Two Houses to Rent