Real Estate Math
A Rhode Island appraiser values a home at $325,000. The home's land is worth $75,000 and the building is worth $250,000. The building has 50 years of economic life and is 10 years old. What is the annual depreciation amount?
A$4,000
B$5,000✓ Correct
C$6,000
D$7,500
Explanation
Annual depreciation = Building Value / Economic Life = $250,000 / 50 = $5,000 per year. Using the values given ($325,000, $75,000), apply the appropriate formula..
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Key Terms to Know
Depreciation
A reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Math Concepts
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