Real Estate Math
An investor purchases a rental property for $200,000 with $40,000 down. The property generates $18,000 annual net operating income and has $12,000 annual debt service. What is the cash-on-cash return?
A9%
B15%✓ Correct
C45%
D30%
Explanation
Cash-on-cash return = (NOI - Debt Service) / Equity invested = ($18,000 - $12,000) / $40,000 = $6,000 / $40,000 = 15%.
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