Real Estate Math
A property's gross income is $72,000 per year. If the buyer wants a 7% return on their total investment and can accept a $4,800/year expense load, what is the maximum investment (purchase price)?
A$960,000✓ Correct
B$1,028,571
C$874,285
D$816,000
Explanation
NOI = $72,000 − $4,800 = $67,200. Max price at 7% cap = $67,200 ÷ 0.07 = $960,000. To solve this, multiply the relevant values: $72,000 and $4,800 at 7%.. The correct answer is $960,000.. This is a common calculation on the Tennessee real estate exam.
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