Real Estate Math
A Virginia investment property was purchased for $500,000 with 25% down. The annual NOI is $40,000. What is the cash-on-cash return on the equity invested?
A8%
B10%
C32%✓ Correct
D40%
Explanation
Equity invested = $500,000 × 25% = $125,000. Cash-on-cash return = NOI ÷ Equity = $40,000 ÷ $125,000 = 32%. (Note: This simplified calculation ignores debt service; actual cash-on-cash uses cash flow after debt service.)
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