Question

Suppose an investor is considering a non-residential rental property that has an asking price of $400,000. The land is valued at $175,000. The property has four rental units that are expected to rent for $1,200 each per month for the next five years (PGI each year of $57,600). Vacancy and bad debt allowance is expected to be 5% of potential gross income. Operating expenses are expected to be 16% of effective gross income. A mortgage loan is available for 80% of the purchase price at 8% annual interest with annual payments over 25 years. The investor faces a 28% tax rate and expects to buy this property on January 1, keep it for 5 years (through December 31 five years later, then sell it for $400,000 (less 5% selling expenses), and assuming that the property is sold as expected, what is the BTER? $400,000 • $380,000 $294,321 $85,679

          Suppose an investor is considering a non-residential rental property that has an asking price of $400,000. The land is valued at $175,000. The property
has four rental units that are expected to rent for $1,200 each per month for the next five years (PGI each year of $57,600). Vacancy and bad debt
allowance is expected to be 5% of potential gross income. Operating expenses are expected to be 16% of effective gross income. A mortgage loan is
available for 80% of the purchase price at 8% annual interest with annual payments over 25 years. The investor faces a 28% tax rate and expects to buy
this property on January 1, keep it for 5 years (through December 31 five years later, then sell it for $400,000 (less 5% selling expenses), and assuming
that the property is sold as expected, what is the BTER?
$400,000
• $380,000
$294,321
$85,679

Suppose an investor is considering a non-residential rental property that has an asking price of 400,000. The land is valued at175,000. The property
has four rental units that are expected to rent for 1,200 each per month for the next five years (PGI each year of57,600). Vacancy and bad debt
allowance is expected to be 5% of potential gross income. Operating expenses are expected to be 16% of effective gross income. A mortgage loan is
available for 80% of the purchase price at 8% annual interest with annual payments over 25 years. The investor faces a 28% tax rate and expects to buy
this property on January 1, keep it for 5 years (through December 31 five years later, then sell it for 400,000 (less 5% selling expenses), and assuming
that the property is sold as expected, what is the BTER?400,000
• 380,000294,321
85,679

Added by Brandi O.

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