Question

Acme Development Company is considering building a twenty-five (25) unit apartment building near Catholic University due to the demand for off-campus student housing. Given the unique needs of the student population, Acme anticipates they will achieve 75% occupancy over the course of a year. Acme is basing their decision on the following assumptions:

 MARR:15%
 Land Acquisition:$150,000
 Construction Cost:$2,250,000
 Investment Period:20-years

Maintenance Expenses:Years 1 to 10: $500 per unit, Years 11 to 20: $1,000 per unit

 Property Taxes/Insurance:10% of total invested cost
Determine the break-even rent that should be charged per month for each apartment.

Answer 1