Real Estate Math
A tenant has a gross lease at $2,500/month. Annual operating expenses paid by the landlord are $15,000. What is the landlord's net annual income from this property?
A$15,000✓ Correct
B$30,000
C$45,000
D$12,750
Explanation
Annual gross rent = $2,500 × 12 = $30,000. Landlord net = $30,000 − $15,000 = $15,000.
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Key Terms to Know
Gross Rent Multiplier (GRM)
A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Net Operating Income (NOI)The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
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.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
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