Sasha buys an investment property for $300,000 and borrows the full amount at 7% p.a.(per annum) simple interest. she rents out the property at $1500 per month and pays $3000 per year in rates and other costs to keep the property.
a) find the amount of interest Sasha needs to pay back every month
b) find Sasha's yearly income from rent
c) by considering the other costs in keeping the property, calculate Sasha's overall loss in a year.
d) Sasha hopes that the property's value will increase enough to cover any loss she is making. by what percentage of the original price will the property need to increase in value per year
a) To find the amount of interest Sasha needs to pay back every month, first find the yearly interest by multiplying the loan amount by the interest rate: $300,000 * 0.07 = $21,000. Then, divide the yearly interest by 12 months: $21,000 / 12 = $1,750 per month.
b) To find Sasha's yearly income from rent, multiply the monthly rent by 12: $1,500 * 12 = $18,000.
c) To calculate Sasha's overall loss in a year, first add the yearly cost of interest and other costs: $21,000 + $3,000 = $24,000. Then, subtract Sasha's yearly income from rent: $24,000 - $18,000 = $6,000 loss.
d) To find the percentage the property needs to increase in value per year, divide the yearly loss by the original price and multiply by 100: ($6,000 / $300,000) * 100 = 2%. The property needs to increase in value by 2% each year to cover Sasha's losses.
a) To find the amount of interest Sasha needs to pay back every month, we can use the formula for simple interest:
Interest = Principal × Rate × Time
Here, the principal is $300,000, the rate is 7% (or 0.07), and time is 1 year. We need to calculate the interest for each month, so we divide the yearly interest by 12:
Monthly Interest = (Principal × Rate × Time) / 12
= ($300,000 × 0.07 × 1) / 12
= $17,500 / 12
≈ $1,458.33
Therefore, Sasha needs to pay back approximately $1,458.33 in interest every month.
b) Sasha's yearly income from rent can be calculated by multiplying the monthly rent by 12:
Yearly Income from Rent = Monthly Rent × 12
= $1,500 × 12
= $18,000
Therefore, Sasha's yearly income from rent is $18,000.
c) To calculate Sasha's overall loss in a year, we need to subtract the total costs from the yearly income:
Overall Loss = Yearly Income from Rent - Yearly Costs
= $18,000 - $3,000
= $15,000
Therefore, Sasha's overall loss in a year is $15,000.
d) Sasha hopes that the property's value will increase enough to cover any loss she is making. To find the percentage increase needed in the property's value per year, we can use the formula:
Percentage Increase = (Overall Loss / Original Price) × 100
Here, the overall loss is $15,000 and the original price is $300,000:
Percentage Increase = ($15,000 / $300,000) × 100
= 0.05 × 100
= 5%
Therefore, the property will need to increase in value by 5% per year to cover Sasha's loss.
a) To find the amount of interest Sasha needs to pay back every month, we first need to find the annual interest amount she needs to pay. The formula for simple interest is:
Interest = Principal * Rate * Time
Given:
Principal = $300,000
Rate = 7% p.a. (7/100)
Time = 1 year
Substituting the values into the formula, we have:
Interest = $300,000 * (7/100) * 1
Interest = $21,000 per year
To find the monthly interest, we divide the annual interest by 12 (months):
Monthly interest = $21,000 / 12
Monthly interest ≈ $1,750
Therefore, Sasha needs to pay about $1,750 of interest every month.
b) Sasha's yearly income from rent can be found by multiplying the monthly rent by 12 (months):
Yearly income from rent = $1,500 * 12
Yearly income from rent = $18,000
Thus, Sasha's yearly income from rent is $18,000.
c) To calculate Sasha's overall loss in a year, we need to subtract the yearly income from rent from the total yearly costs of owning the property.
Total yearly costs = Rates + Other costs
Total yearly costs = $3,000 + $18,000
Total yearly costs = $21,000
Overall loss = Total yearly costs - Yearly income from rent
Overall loss = $21,000 - $18,000
Overall loss = $3,000
Therefore, Sasha's overall loss in a year is $3,000.
d) To calculate the percentage increase in the property's value that Sasha needs per year to cover her loss, we need to determine the percentage increase needed from the original price.
Percentage increase = (Overall loss / Original price) * 100
Using the given values:
Overall loss = $3,000
Original price = $300,000
Percentage increase = ($3,000 / $300,000) * 100
Percentage increase = 1%
Hence, the property's value will need to increase by 1% of the original price per year for Sasha to cover her loss.