Real Estate Math
An investor buys a property for $350,000 and gets a $280,000 mortgage. The annual NOI is $31,500. What is the equity dividend (cash-on-cash) rate before debt service vs. after assuming debt service of $20,160?
A9% before; 16.2% after
B16.2% before; 16.2% after
C9% on purchase; 16.2% on equity✓ Correct
D16.2% cap; 16.2% equity yield
Explanation
Cap rate: $31,500 / $350,000 = 9%. After debt service: $31,500 - $20,160 = $11,340 cash flow. Equity invested: $70,000. Cash-on-cash: $11,340 / $70,000 = 16.2%.
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