Real Estate Math
A Massachusetts investor buys a property for $1,200,000 with a 30% down payment. The lender requires a minimum debt service coverage ratio (DSCR) of 1.25. If annual debt service is $60,000, what minimum annual NOI is required?
A$60,000
B$75,000✓ Correct
C$48,000
D$80,000
Explanation
DSCR = NOI ÷ Debt Service. Required NOI = DSCR × Debt Service = 1.
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Key Terms to Know
Net Operating Income (NOI)
The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
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.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Math Concepts
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