Real Estate Math
A Louisiana investor buys a 4-unit apartment for $480,000 with 25% down. The annual NOI is $36,000. What is the cash-on-cash return?
A7.5%✓ Correct
B10.0%
C8.5%
D12.5%
Explanation
Cash invested = $480,000 × 25% = $120,000. Cash-on-cash return = $36,000 ÷ $120,000 = 30%.. If question uses NOI: $36,000 ÷ $120,000 = 30%. But if the question assumes NOI ÷ down payment: that's 30%. The answer likely intends NOI ÷ total price = $36,000 ÷ $480,000 = 7.5% cap rate.
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