Real Estate Math
A Texas real estate investor analyzes a warehouse property: purchase price $800,000, NOI $60,000, annual debt service $42,000 (on a $600,000 loan). What is the equity dividend rate (cash-on-cash return)?
A7.5%
B9%✓ Correct
C8%
D10%
Explanation
Annual cash flow = NOI – Debt Service = $60,000 – $42,000 = $18,000. Equity invested = $800,000 – $600,000 = $200,000. Equity dividend rate = $18,000 / $200,000 = 0.09 = 9%.
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