Real Estate Math
A commercial building has 15,000 sq ft of leasable space. Operating expenses are $3.50/sq ft. What is the annual operating expense budget?
AA. $42,000
BB. $52,500✓ Correct
CC. $35,000
DD. $75,000
Explanation
Annual operating expenses = 15,000 sq ft × $3.50/sq ft = $52,500.
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Key Terms to Know
Net Operating Income (NOI)
The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
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.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
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