Real Estate Math
A property manager collected $18,500 in rents last month. Operating expenses were $7,400. The property manager's fee is 8% of gross collected rents. What is the net income to the property owner?
A$9,620✓ Correct
B$10,100
C$9,780
D$11,100
Explanation
Management fee = $18,500 × 8% = $1,480. Net to owner = $18,500 – $7,400 – $1,480 = $9,620.
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Key Terms to Know
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.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Net Operating Income (NOI)The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
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