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

The first house's yearly income from rent is $1,500 * 12 = $18,000. The rate of return is $18,000 / $200,000 = 0.09 or 9%. To achieve the same rate of return on the second house priced at $280,000, Maria would need a yearly income of 0.09 * $280,000 = $25,200. Monthly, this equates to $25,200 / 12 = $2,100.

Maria Is Looking to Buy One of Two Houses to Rent