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ROI question

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shughes87 | 22 Feb 2015, 06:56 PM Agree 0
From the crew september issue on pg. 21 there's a chart that compares ROI for 3 properties featuring rental suits. The ROI for 2 of the 3 make sense to me, but i was wondering if someone could explain the math of the third one.

three assumptions:
-all utilities are paid by the tenants
-expenses include mortgage payments
-mortgage payments are calc'd at 80% LTV based on new value price at 3%, 25 yr amortization.

purchase price: $355,000
cost of reno: $40,000
new value: $425,000
annual income: $36,000
annual expenses: $27,300
net income: $8700
ROI: 15.8%

I'm not really sure where the 15.8% come from for ROI. If anyone could explain it would be much appreciated
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