Real Estate Math
A Minnesota duplex rents for $1,350/unit/month. With a 7% vacancy rate, what is the annual effective gross income?
A$30,132✓ Correct
B$28,926
C$29,484
D$32,400
Explanation
Annual potential gross income = 2 x $1,350 x 12 = $32,400. Vacancy loss = $32,400 x 7% = $2,268.
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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.
Pre-ApprovalA lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Math Concepts
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