Real Estate Math
A commercial lease is for 3,200 sq ft at $22/sq ft/year plus a 2% annual increase. What is the monthly rent in Year 2?
A$5,867
B$5,984✓ Correct
C$5,984.27
D$6,043
Explanation
Year 1 annual rent = 3,200 × $22 = $70,400. Year 2 annual rent = $70,400 × 1.
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Key Terms to Know
Gross Rent Multiplier (GRM)
A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
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.
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