(6) Alex is considering buying a house. He is planning to rent the house and sel

Question

(6) Alex is considering buying a house. He is planning to rent the house and sell it after few years to buy a bigger house. His current plan is to sell the house after 5 years. The house worth $255,000 today. He can get $255,000 mortgage for 9% nominal annual interest rate, compounded monthly. Based on the information he collected, the house can be sold for 385,000 in 5 years. The monthly maintenance fee is $200. How much should he charge the tenants (monthly) in rent to cover the maintenance fee and the mortgage? Excel solution is NOT accepted.

Explanation / Answer

Using financial calculator,

PV=255000

N=5*12

I/Y=9%/12

FV=0

CPT PMT=5293.38

hence, to pay off the loan in 5 years, he should charge the tenannts $5293.38 and additional $200 per month that is $5493.38 per month

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