Real Estate Math
A Harlem building with 8 units each at $1,800/month rent has an annual operating expense ratio of 45%. The annual NOI is:
A$172,800
B$95,040✓ Correct
C$77,760
D$86,400
Explanation
Annual gross rent = 8 × $1,800 × 12 = $172,800. Expenses = $172,800 × 45% = $77,760.
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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.
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.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Math Concepts
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