Maryland Home Improvement PSI Practice Exam

What is the required monthly net income for an owner wanting a 12% annual return on a $115,000 property?

1. $1,062

2. $1,150

3. $9,583

4. $13,800

The correct answer is: $1,150

To determine the required monthly net income for an owner seeking a 12% annual return on a property valued at $115,000, the calculation involves first figuring out the desired annual income. The desired annual net income can be calculated by multiplying the property's value by the desired return rate. In this case, you would take 12% of $115,000, which equates to $13,800. This figure represents the total annual return the owner wants from the property. To find the monthly net income, divide the annual return by 12 months. When you divide $13,800 by 12, the resulting monthly net income is $1,150. This calculation shows that in order to achieve the desired annual return on the property, the owner would need a net income of $1,150 each month. This understanding highlights the relationship between property value, return rate, and the income required to meet investment goals, which is critical for anyone in the real estate or property management fields.