Real Estate Math
A North Dakota investment property has a purchase price of $600,000 with 30% down. Annual NOI is $42,000 and annual debt service is $27,000. What is the cash-on-cash return on the down payment?
A5%
B7%
C8.33%✓ Correct
D10%
Explanation
Cash flow = NOI − Debt service = $42,000 − $27,000 = $15,000. Down payment = $600,000 × 30% = $180,000. Cash-on-cash return = $15,000 / $180,000 = 0.0833 = 8.33%.
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