Question

Buying rental property is an investment option that carries a higher risk than some other options. However, the returns can be good. Assume you have purchased a single-
family home that you intend to rent for $850 per month. You will have the following expenses:
Monthly mortgage $390
Monthly insurance $60
Semiannual property taxes $340
Repairs (yearly estimate) $500
Monthly lawn care or snow removal $100
The return on investment for the property is
% (Round to one decimal place.)

Answer 1

Based on the expenses involved in running the property, and the rental amount, the return on the investment would be 31.1%.

What is the return on investment?

First find the amount earned per year:

= 850 x 12

= $10,200

The yearly expenses would be:

= (390 x 12) + (60 x 12) + (340 x 2) + 500 + (100 x 12)

= 4,680 + 720 + 680 + 500 + 1,200

= $7,780

The annual ROI is:

= (10,200 - 7,780) / 10,200 x 100%

= 31.1%

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