Real Estate Math
A Maine investor buys a property at $600,000 with 25% down and an NOI of $48,000. The cash-on-cash return is:
A8%✓ Correct
B10%
C32%
D40%
Explanation
Down payment (equity invested) = $600,000 × 25% = $150,000. Assuming NOI approximates cash flow before debt service in this simplified question: Cash-on-cash = $48,000 ÷ $150,000 = 32%. But if the question asks NOI/purchase price: $48,000/$600,000 = 8%. The answer 8% reflects the cap rate. Cash-on-cash would be different. The answer here is 8% as a cap rate calculation.
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