Maria is thinking about purchasing a two-bedroom condominium as a rental property investment. She...

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Maria is thinking about purchasing a two-bedroom condominium as a rental property investment.
She believes she can easily find a family to rent the property, or rent it out to travelers through a
room sharing service, and earn $1,200 per month in rent. Her monthly expenses include (1) a
mortgage with a payment of $760,(2) condo fees of $110,(3) taxes of $170,(4) insurance of $75,
and (5) miscellaneous maintenance of $80. Maria would also generate tax savings from
depreciation of the rental property which would generate a positive $300 of savings that should
be included in her positive cash flows.
How much net annual cash-flow will Maria make by being a landlord?
Maria can make
per month
Assume that she uses $20,000 of her own money and an $80,000 mortgage to purchase the
property. Ignoring any increase in equity in her home and considering only her investment of
$20,000, what is her annual rate of return from the net rental cash flow? What are Maria's major
risks associated with this investment? (Round answer to 2 decimal places, e.g.52.25.)
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