Jennifer is choosing between buying a condominium property and renting it. The price for the condo...
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Jennifer is choosing between buying a condominium property and renting it. The price for the condo is $157,000. The financing terms, if the condo is purchased, are: LTV = 0.9, loan term = 30 years, interest rate = 5.75%, monthly payments. If the condo is purchased, it is subject to immediate closing costs of $9,420. Further, projected property taxes are $2,400 per year, monthly association fee is $160. If Jennifer decides to sell the purchased condo at some point of time in the future, such sale will be subject to the agent's commission of 7 percent. If a similar condo is rented instead, the current rent is $1,184.59 per month. If instead of buying a condo Jennifer chooses to rent, she will invest money that otherwise would have been spent on condo into stock market. Assume that stock market yields a 9 percent annual return. Compute the profit/loss of buying versus renting for different periods of time spent in the purchased condo until it is sold for two different scenarios of the condo's price appreciation: a) Worst case, when annual price increase is 2.5 percent; b) Best case, when annual price increase is 7.5 percent. Jennifer is choosing between buying a condominium property and renting it. The price for the condo is $157,000. The financing terms, if the condo is purchased, are: LTV = 0.9, loan term = 30 years, interest rate = 5.75%, monthly payments. If the condo is purchased, it is subject to immediate closing costs of $9,420. Further, projected property taxes are $2,400 per year, monthly association fee is $160. If Jennifer decides to sell the purchased condo at some point of time in the future, such sale will be subject to the agent's commission of 7 percent. If a similar condo is rented instead, the current rent is $1,184.59 per month. If instead of buying a condo Jennifer chooses to rent, she will invest money that otherwise would have been spent on condo into stock market. Assume that stock market yields a 9 percent annual return. Compute the profit/loss of buying versus renting for different periods of time spent in the purchased condo until it is sold for two different scenarios of the condo's price appreciation: a) Worst case, when annual price increase is 2.5 percent; b) Best case, when annual price increase is 7.5 percent.
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To calculate the profitloss of buying versus renting for different periods of time we need to compare the total costs and gains of each option Scenari... View the full answer
Related Book For
Introduction To Federal Income Taxation In Canada
ISBN: 9781554965021
33rd Edition
Authors: Robert E. Beam, Stanley N. Laiken, James J. Barnett
Posted Date:
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