Real Estate Math
A Louisiana real estate investor purchases a property for $340,000 with a $68,000 down payment. The annual cash flow after debt service is $12,240. What is the cash-on-cash return?
A3.6%
B18.0%✓ Correct
C12.0%
D6.5%
Explanation
Cash-on-cash return = Annual Cash Flow ÷ Cash Invested = $12,240 ÷ $68,000 = 0.18 = 18.0%. Using the values given ($340,000, $68,000), apply the appropriate formula.. The correct answer is 18.0%.. This is a common calculation on the Louisiana real estate exam.
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