Real Estate Math
An Indiana investor's property has a purchase price of $550,000, annual NOI of $44,000, and annual debt service of $36,000. What is the equity dividend (cash-on-cash) rate if they put 25% down?
A5.8%✓ Correct
B6.5%
C7.6%
D8.2%
Explanation
Down payment (equity) = 25% × $550,000 = $137,500. Annual cash flow = NOI − Debt service = $44,000 − $36,000 = $8,000. Cash-on-cash = $8,000 ÷ $137,500 = 5.82% ≈ 5.8%.
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