You are considering purchasing a house in a new development that is currently being constructed. The price of the house is $400,000, and you are required to make a down payment of 20%. You have been approved for a 30-year mortgage with an interest rate of 3.5%. You plan to rent out the house for the first 5 years, after which you will move in and occupy the house. The current rent in the area is $1,500 per month, and you expect it to increase at a rate of 3% per year. If you sell the house after 20 years, what is the expected rate of return on your investment?

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The detailed answer for the above question is provided below To calculate the expected rate of return on the investment we need to estimate the future ... View the full answer