Question

You are considering the purchase of a condominium to use as a rental property. You estimate that you can rent the condominium for $ 1 comma 300 per month and that​ taxes, insurance, and maintenance costs will run about $ 300 per month. If interest rates are 12 % compounded​ monthly, how large a 20 dash year mortgage can you assume and still have the rental income cover the monthly​ expenses?

Answer 1

Answer:

It can take a mortgage up to 90,819 dollars

Explanation:

1,300 per month

-300 maintenance and other cost

1,000 per month

What is the PV of an annuity of 1,000 dollars

$C \times \frac{1-(1+r)^{-time} }{rate} = PV$

C 1000        (proceeds from the rent)

time  240         (20 year x 12 month per year)

rate 0.01          ( 12% / 12 months = 1%)

$1000 \times \frac{1-(1+0.01)^{-240} }{0.01} = PV$

PV $90,819.4163

It can take a mortgage up to 90,819 dollars