Real Estate Math
A Virginia builder sells a new home for $525,000. Construction cost was $350,000 (land included). What is the builder's gross profit margin?
A25%
B33.3%✓ Correct
C40%
D50%
Explanation
Gross profit = $525,000 – $350,000 = $175,000. Gross profit margin = $175,000 ÷ $525,000 = 33.
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Key Terms to Know
Amortization
The 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.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Math Concepts
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