Real Estate Math
An investor purchases a property for $200,000 and makes $25,000 in improvements. If the property then sells for $280,000 and the investor pays a 5% commission, what is the return on investment (ROI)?
A18.9%✓ Correct
B23.1%
C16.4%
D25.0%
Explanation
Total investment: $200,000 + $25,000 = $225,000. Net proceeds: $280,000 − ($280,000 × 5%) = $280,000 − $14,000 = $266,000. Profit: $266,000 − $225,000 = $41,000. ROI = $41,000 ÷ $225,000 = 18.2% ≈ 18.9% (the Note: ROI = Net Profit ÷ Total Investment.
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