Real Estate Math
A Maine investor uses the 50% rule as a screening tool: operating expenses (excluding mortgage) are estimated at 50% of gross rent. Monthly gross rent is $2,800. Estimated monthly operating expenses are:
A$700
B$1,400✓ Correct
C$2,100
D$2,800
Explanation
50% rule: operating expenses = $2,800 × 50% = $1,400/month estimated. To solve this, multiply the relevant values: $2,800 at 50%..
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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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