Real Estate Math
A Virginia investment property sold for $420,000. The investor's equity was $105,000. If the property appreciated $42,000, what is the return on equity (leverage effect)?
A10%
B30%
C40%✓ Correct
D42%
Explanation
Return on equity = Appreciation ÷ Equity = $42,000 ÷ $105,000 = 40%. This shows how leverage amplifies returns — the property appreciated 10% but the equity return was 40%.
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