Real Estate Math
A Mississippi property has annual effective gross income of $72,000. Operating expenses are $29,000. Debt service is $22,000. Annual cash flow (before taxes) is:
A$43,000
B$21,000✓ Correct
C$50,000
D$29,000
Explanation
NOI = EGI - Operating Expenses = $72,000 - $29,000 = $43,000. Cash flow before taxes = NOI - Debt Service = $43,000 - $22,000 = $21,000. Cash flow before taxes (CFBT) is what the investor receives after operating expenses and mortgage payments.
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