At the end of 1987 you bought a piece of land for 35000 In a

At the end of 1987, you bought a piece of land for $35,000. In addition to the $35,000, you paid $1,700 in closing costs (costs associated with the purchase and title registration). For the years 1988 through 2002, you paid, on average, $950 in property taxes at the end of each year. At the end of 2003, you sold the land for $120,000. A sale time, you paid a 6% commission to the realtor and $1,600 was your share of the closing costs. What was the ROR on this investment?

Solution

Total initial cost = $(35,000 + 1,700) = $36,700

Costs from 1988 to 2002 = $950 x 15 years = $14,250

Costs at closure = $120,000 x 6% + $1,600 = $(7,200 + 1,600) = $8,800

ROR = ([Sale price - (Purchase price + All costs)] / (Purchase price + Closing costs at purchase)) - 1

= $[120,000 - (36,700 + 14,250 + 8,800)] / $36,700

= 60,240 / 36,700

= 1.6417 - 1

= 0.6417, or 64.17%