Real Estate Math
An Alaska income property has an annual NOI of $66,000 and sells at a 7.5% cap rate. The buyer finances 75% of the purchase price at a 6.5% mortgage constant. What is the annual debt service?
A$42,900✓ Correct
B$42,000
C$45,500
D$52,500
Explanation
Sale price = $66,000 ÷ 0.075 = $880,000. Loan = $880,000 × 75% = $660,000. Annual debt service = $660,000 × 6.5% = $42,900. Wait, mortgage constant ≠ interest rate. If mortgage constant is 6.5% = 0.065: $660,000 × 0.065 = $42,900.
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