renovation payback period

[rbcc]

Hi,

I am not shire if I'm doing this question right

A land lord currently rents an apartment for $200/month. $50,000 can be invested to convert the apartment into 2 apartments, that will be rented out for $600/month each. Operating costs will increase by $55/month in total. Calculate the payback period.

so the incremental benefit would be (2*600)-200=1 000 the incremental cost is $55 so
1000-55=945 per month net benefit

945(x)=50 000
x=52.91 months

thanks

 

[JeffM]

Your logic and computations look fine to me. I can't say I am very impressed with the realism of the problem: you reduce the size of the apartments by 50% and increase the rent on each by 200%?