What is the monthly rent per apartment if an investor aims for a 20% return on a $150,000 quadraplex with $30,000 expenses?

What is the monthly rent per apartment if an investor aims for a 20% return on a $150,000 quadraplex with $30,000 expenses?

• A. $800
• B. $1,200
• C. $1,500
• D. $1,250

Answer: (D)

To determine the monthly rent per apartment that would provide a 20% return on a $150,000 quadraplex after accounting for expenses, we first need to calculate the net operating income required for that return. The investor wants a 20% return on the initial investment of $150,000. To find the expected return in dollar terms, we calculate: 20% of $150,000 = $30,000. This means that the investor requires an annual net income of $30,000 from the property. Next, we have to consider the expenses of $30,000. The total annual income needed to cover both the desired return and the operating expenses is: $30,000 (desired return) + $30,000 (expenses) = $60,000. Now, to find the monthly income needed, we divide the annual income requirement by 12: $60,000 / 12 = $5,000. Since the quadriplex consists of four apartments, to determine the monthly rent per apartment, we divide the total monthly income needed by the number of apartments: $5,000 / 4 = $1,250. Thus, the monthly rent per apartment should be set at $1

To determine the monthly rent per apartment that would provide a 20% return on a $150,000 quadraplex after accounting for expenses, we first need to calculate the net operating income required for that return.

The investor wants a 20% return on the initial investment of $150,000. To find the expected return in dollar terms, we calculate:

20% of $150,000 = $30,000.

This means that the investor requires an annual net income of $30,000 from the property.

Next, we have to consider the expenses of $30,000. The total annual income needed to cover both the desired return and the operating expenses is:

$30,000 (desired return) + $30,000 (expenses) = $60,000.

Now, to find the monthly income needed, we divide the annual income requirement by 12:

$60,000 / 12 = $5,000.

Since the quadriplex consists of four apartments, to determine the monthly rent per apartment, we divide the total monthly income needed by the number of apartments:

$5,000 / 4 = $1,250.

Thus, the monthly rent per apartment should be set at $1