Another math problem

6 Replies

I hope you can help me with this one. If you can figure out the answer, please tell me how you got there. :/

Mr. Jones leased all 12 units in his residential income property for a total monthly rental of \$4500. If this figure represents an 8% annual return on Mr. Jones's investment, what was the original cost of the property?

let's see is this a trick question?  An 8% yield that equates to \$4500 = \$56,250

sorry forgot you asked for how...

4500 / .08 = 56,250

You don't have enough information here- in order to back out purchase price from monthly rent and annual return rate, you need to have a handle on expenses.  Find out what the taxes are, insurance, and what is he paying for utilities?  You'll need to estimate his annual repair and capital expenditures too.

The answer choices are:

A: \$675,000

B: \$680,000

C: \$669,000

D: \$679,000

\$4500/month is 54,000/year.  If 54000/year is an 8% annual yield (gross rent), then the property cost was \$675K.

Originally posted by @Roy N. :

\$4500/month is 54,000/year.  If 54000/year is an 8% annual yield (gross rent), then the property cost was \$675K.

Correct. These get confusing on the test because some like this one use gross rent. Others use NOI.

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