What should each unit rent for in a quadraplex with a sales price of $150,000 and operating expenses of $30,000 to reach a 20% return?

What should each unit rent for in a quadraplex with a sales price of $150,000 and operating expenses of $30,000 to reach a 20% return?

• A. $1,000
• B. $1,250
• C. $3,000
• D. $5,000

Answer: (B)

To determine the rent for each unit in a quadraplex that will yield a 20% return given a sales price of $150,000 and operating expenses of $30,000, you start by calculating the required return. Firstly, the total investment in the property is $150,000. A 20% return means that the property should generate $30,000 annually (which is 20% of $150,000). Since there are operating expenses of $30,000, the total income required from the rents should cover both the desired return and the expenses. Thus, the total income needed is calculated as follows: $30,000 (desired return) + $30,000 (operating expenses) = $60,000. Now, since a quadraplex has four rental units, you would need to divide this total income needed by the number of units: $60,000 / 4 units = $15,000 per unit annually. To find the monthly rental amount for each unit, you divide the annual rent by 12 months: $15,000 / 12 = $1,250. Therefore, in order to achieve a 20% return while covering expenses, each unit should rent for $1

To determine the rent for each unit in a quadraplex that will yield a 20% return given a sales price of $150,000 and operating expenses of $30,000, you start by calculating the required return.

Firstly, the total investment in the property is $150,000. A 20% return means that the property should generate $30,000 annually (which is 20% of $150,000). Since there are operating expenses of $30,000, the total income required from the rents should cover both the desired return and the expenses.

Thus, the total income needed is calculated as follows:

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

Now, since a quadraplex has four rental units, you would need to divide this total income needed by the number of units:

$60,000 / 4 units = $15,000 per unit annually.

To find the monthly rental amount for each unit, you divide the annual rent by 12 months:

$15,000 / 12 = $1,250.

Therefore, in order to achieve a 20% return while covering expenses, each unit should rent for $1