Real Estate Math
A Louisville duplex generates $1,800/month per unit (2 units). Annual vacancy is 5%. What is the effective gross income?
A$36,000
B$40,320
C$41,040✓ Correct
D$43,200
Explanation
Gross potential income = $1,800 × 2 units × 12 = $43,200. Vacancy (5%) = $43,200 × 0.
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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.
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.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
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