Real Estate Math
A Hawaii property's potential gross income is $90,000 per year. With a 5% vacancy rate, what is the effective gross income?
AA. $85,500✓ Correct
BB. $86,000
CC. $87,000
DD. $90,000
Explanation
Vacancy loss = $90,000 × 0.05 = $4,500.
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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.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
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.
Math Concepts
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