A friend, Ms. Michelle, was renting a house for $1,000 per month, but recently purchased a...

90.2K

Verified Solution

Question

Finance

A friend, Ms. Michelle, was renting a house for $1,000 permonth, but recently purchased a comparable home for $200,000 plus1% for various fees, inspections, etc. Ms. Michelle’s opportunitycost of capital is 6% per year and she will have to pay a 5%commission when she sells the house. Assuming that she has to moveand sell the house in one year, how much the house appreciate invalue for her to be better off than renting?

Answer & Explanation Solved by verified expert
3.9 Ratings (623 Votes)
For her to be better off buying than renting the present value of the gains from selling the house should be higher than the present value of rent expense Present value    See Answer
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Transcribed Image Text

A friend, Ms. Michelle, was renting a house for $1,000 permonth, but recently purchased a comparable home for $200,000 plus1% for various fees, inspections, etc. Ms. Michelle’s opportunitycost of capital is 6% per year and she will have to pay a 5%commission when she sells the house. Assuming that she has to moveand sell the house in one year, how much the house appreciate invalue for her to be better off than renting?

Other questions asked by students