Real Estate Math
A Colorado property manager charges a 10% management fee on gross rents collected. If monthly rents total $8,500 and there is a 5% vacancy, what is the management fee for the month?
A$807.50✓ Correct
B$850.00
C$892.50
D$935.00
Explanation
Effective gross income = $8,500 × (1 − 5%) = $8,500 × 0.95 = $8,075.
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Key Terms to Know
Debt-to-Income Ratio (DTI)
A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
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