Real Estate Math
A South Carolina investor uses leverage (80% mortgage) to buy a $500,000 property. If the property appreciates 5%, what is the return on invested equity?
A5%
B10%
C20%
D25%✓ Correct
Explanation
Property gain = $500,000 × 5% = $25,000. Equity invested = $500,000 × 20% = $100,000. Return on equity = $25,000 ÷ $100,000 = 25%. Leverage magnifies the return on equity.
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