3
7.5
points
VID
mework: Residential Real Estate Fundamentals Assignment i
Mc
Graw
Hill
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Problem 7-5
Mail-Beaco
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x Answer is complete but not entirely correct.
a. Is this a good investment?
b. Sale price
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Join c
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You have an opportunity to acquire a property from First Capital Bank. The bank recently obtained the property from a borrower who
defaulted on his loan. First Capital is offering the property for $236,000. If you buy the property, you believe that you will have to
spend (1) $11,100 on various acquisition-related expenses and (2) an average of $2,600 per month during the next 12 months for repair
costs, and so on, in order to prepare it for sale. Because First Capital Bank would like to sell the property as soon as possible, it is
willing to provide $216,000 in financing at 4.25 percent interest for 12 months payable monthly (interest only). Your market research
indicates that after you repair the property, it may sell for about $272,000 at the end of one year. Furthermore, you will probably have
to pay about $3,600 in fees and selling expenses in order to sell the property at that time.
Required:
"
a. If you wanted to earn a 20 percent return compounded monthly, do you believe that this would be a good investment?
b. What would you need to sell the property for in order to achieve the 20 percent return? (Do not round intermediate calculations.
Round your final answer to nearest whole dollar amount.)
#C
F4
Gradli
No
$ 254,900
F5
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