You purchase a building lot for $20,000 and build q $110,000 duplex apartment on it. You paid cash for the lot, the bank wouldn't give you a loan to buy land. However, they are willing to waive the down payment requirement for the building loan, based on the land as security. You take out a 10 year loan at an APR of 5.85%.
What is your monthly payment? What is your yearly loan payment?
What is your yearly depreciation? What is the book value of the property at the end of ten years?
Assume that real estate taxes are $5,700 per year and fire insurance costs $1,000 per year. Also assume the property is occupied 87% of the time. What is the minimum you believe you need to charge for rent, and why that amount?
Assume you sell the property at the end of ten years for a net price of $146,560, what is your capital gain on the sale, subject to income tax? If your capital gain tax rate is 20%, how much tax do you owe? How much do you have left after taxes? What was the annual percentage yield of this investment over the 10 years you owned it? (consider what you invested and what you earned on that investment)