Patty Lo purchased a house that she planned to use as a rental property for $300,000. During the past year, she rented the house for $1750 per month. Property taxes were $3900 for the year, and other expenses were $450 for a new garage door opener and $650 for lawn care. The current appraised value of the property is $315,000. What is Patty Lo's rate of total return?
A) 10.3%
B) 11.8%
C) 10.9%
D) 11.6%
E) 11.0%

Question

Quizplus · Accepted Answer

The correct answer is A because the total return is calculated as follows:Total return = (Rental income + Appreciation) / (Initial investment + Expenses)Rental income = $1750 x 12 = $21,000Appreciation = $315,000 - $300,000 = $15,000Expenses = $3900 + $450 + $650 = $5000Initial investment = $300,000Total return = ($21,000 + $15,000) / ($300,000 + $5000) = 10.3%

Patty Lo Purchased a House That She Planned to Use