Real Estate Math
A South Dakota investor buys a rental house for $175,000 and makes a $35,000 down payment. Monthly rent is $1,400 and monthly expenses are $450. What is the annual cash-on-cash return?
A16.2%✓ Correct
B30.9%
C20.4%
D25.7%
Explanation
Annual cash flow: ($1,400 - $450) × 12 = $950 × 12 = $11,400. Cash-on-cash return: $11,400 ÷ $35,000 = 0.3257 = 32.57%.6%. The9% though exact is 32.6%.
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