Real Estate Math
An investor buys a property for $500,000 with 25% down. Their annual NOI is $40,000. After paying the annual mortgage of $27,000, what is their annual cash flow?
A$40,000
B$13,000✓ Correct
C$27,000
D$67,000
Explanation
Annual cash flow = NOI − Annual debt service = $40,000 − $27,000 = $13,000. To solve this, multiply the relevant values: $500,000 and $40,000 at 25%.. The correct answer is $13,000.. This is a common calculation on the Tennessee real estate exam.
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