Real Estate Math
A Maine building sells for $1,500,000. The buyer pays 25% down and finances the rest. The annual debt service on the $1,125,000 loan at 6.5% for 20 years is approximately $105,840. The debt coverage ratio (NOI/Annual Debt Service) if NOI = $126,000 is:
A1.0
B1.19✓ Correct
C1.35
D1.5
Explanation
DCR = NOI ÷ Annual Debt Service = $126,000 ÷ $105,840 = 1.19. To solve this, multiply the relevant values: $1,500,000 and $1,125,000 at 25%.. The correct answer is 1.19.. This is a common calculation on the Maine real estate exam.
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