Real Estate Math
An investor puts $100,000 down on a $400,000 property. The property appreciates 6% in the first year. What is the investor's return on equity (ROE) from appreciation alone?
A6%
B12%
C18%
D24%✓ Correct
Explanation
Appreciation: $400,000 × 0.06 = $24,000. ROE = Appreciation ÷ Down payment = $24,000 ÷ $100,000 = 24%. This demonstrates the leverage effect of real estate investment.
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