Burt bought a house for $250,000 and plans to rent it out for $2,000 per month. his expected annual rate of return from renting the house is approximately:

Question

Malcolm

Business

26 October, 13:34

Burt bought a house for $250,000 and plans to rent it out for $2,000 per month. his expected annual rate of return from renting the house is approximately:

+3

Answers (1)

Know the Answer?

Caylee Webb · Answer 1

Burt's annual rate of return would be approximately 9.6 %. The annual cash inflow of Burt from renting the house would be $24,000 (computed by multiplying the $2,000 with 12 months). The annual cash inflow would then be divided with the cost of investment he paid to purchase the house which is $250,000. Solving the equation, we can get the annual rate of return of 9.6 %.