Real Estate Math
An investor purchases a rental property for $320,000 with $80,000 down. The annual NOI is $24,000 and debt service is $18,000. What is the cash-on-cash return?
A7.5%✓ Correct
B6.25%
C3%
D8%
Explanation
Before-tax cash flow = $24,000 − $18,000 = $6,000. Cash-on-cash = $6,000 ÷ $80,000 = 7.
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