Real Estate Math
What is the annual depreciation on a Massachusetts residential rental property with an improvement value of $380,000 using straight-line depreciation over 27.5 years?
A$13,818✓ Correct
B$19,000
C$38,000
D$7,600
Explanation
Annual depreciation = $380,000 ÷ 27.5 = $13,818.
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Key Terms to Know
Depreciation
A reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Math Concepts
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