Real Estate Math

A Hawaii investor has a $900,000 property with a $600,000 mortgage at 5% interest. Annual interest expense is $30,000. The NOI is $55,000. What is the annual cash flow before taxes?

AA. $25,000✓ Correct
BB. $30,000
CC. $35,000
DD. $20,000

Explanation

Cash flow = NOI - Annual Debt Service. If interest-only: $55,000 - $30,000 = $25,000.

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