Real Estate Math
A Colorado investment property is purchased for $500,000. The investor requires an 8% cash-on-cash return on a $125,000 down payment. What annual cash flow is needed?
A$8,000
B$10,000✓ Correct
C$40,000
D$50,000
Explanation
Cash-on-cash return = Annual Cash Flow / Cash Invested. $10,000 / $125,000 = 8%. Required annual cash flow = $125,000 × 8% = $10,000.
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