Real Estate Math
A Pennsylvania investment property purchased for $350,000 produces annual cash flow of $21,000 after all expenses and debt service. What is the cash-on-cash return if the investor put 25% down?
A6%
B8%✓ Correct
C24%
D10%
Explanation
Down payment (cash invested) = 25% × $350,000 = $87,500. Cash-on-cash return = Annual Cash Flow ÷ Cash Invested = $21,000 ÷ $87,500 = 24%.24 = 24%. The answer is 24% cash-on-cash return, not the listed 8%. Correction: The answer should be answer index 2 (24%).
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