An investor is considering the purchase of a residential rental property that ha

Question

An investor is considering the purchase of a residential rental property that has an asking price of $400,000. The property has four rental units that are expected to rent for $1,200 each per month.
Operating expenses and vacancy allowances are expected to be 45% of gross income.
An 5% interest only mortgage loan is available for 5 years at 100% of the purchase price.

How much cash income will the investor receive each month of the first year after paying the monthly mortgage payment?

$2,640

$973

$1,361

$1,667

This is Finance real estate

$2,640

$973

$1,361

$1,667

Explanation / Answer

Answer: B. $973

Rental income (1200*4 units)=$4800

Less: operating expenses (4800*45%)=$2160

Net income per month=$2640

Less:Monthly mortage int payment=$1667 [(400000*5%)=20000/12=1667]

Cash income =$973

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