Question

The capitalists rent their shelter and invest their $20,000 in a home that they rent out. As the renters do, the capitalist receive rent of $10,000, but must also rent a shelter for $10,000 per year. The capitalist and the owners must pay for repairs and insurance equal to 8% of the annual market rent and property tax equal to 1% of the house value at the beginning of the year. Suppose that in the 5th year of owning their rental property, the capitalist must make a costly roof repair, totaling $5,000, in order to keep their investment habitable and therefore earning income. Recalculate their position.

Answer 1

purchase Cost ($20,000) - land ($10,000) at closing lost ($900+ $5000) $ 4100 depreciation basis = $4100 depreciation late - 2.5%. depreciation amount = $4100(0025). = $1025