Investment Property Analysis Flashcards
7 cards from real Real Estate Investing practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Investment Property Analysis flashcards as text
A duplex generates $3,200/month gross rent with $1,400/month in operating expenses. What is the annual Net Operating Income (NOI)?
Answer: $21,600
NOI = (Gross Rent − Operating Expenses) × 12 = ($3,200 − $1,400) × 12 = $21,600.
Which metric best compares the income-generating efficiency of properties with different purchase prices?
Answer: Cap rate
Cap rate (NOI ÷ property value) normalizes income relative to price, enabling apples-to-apples comparisons.
An investor purchases a rental property for $400,000 with $80,000 down. Annual cash flow after debt service is $6,400. What is the cash-on-cash return?
Answer: 8%
Cash-on-cash return = Annual Cash Flow ÷ Total Cash Invested = $6,400 ÷ $80,000 = 8%.
What does a Gross Rent Multiplier (GRM) of 10 indicate?
Answer: It takes 10 years of gross rents to equal the purchase price
GRM = Purchase Price ÷ Annual Gross Rent, so GRM of 10 means price equals 10 years of gross rents.
When analyzing a commercial property, a DSCR of 1.0 means:
Answer: NOI exactly covers annual debt service with no surplus
DSCR = NOI ÷ Annual Debt Service; a DSCR of 1.0 means income just covers the loan payments with nothing left over.
A property has a 7.5% cap rate and an NOI of $30,000. What is the estimated market value?
Answer: $400,000
Value = NOI ÷ Cap Rate = $30,000 ÷ 0.075 = $400,000.
Which expense is typically EXCLUDED from the calculation of Net Operating Income?
Answer: Mortgage principal and interest payments
NOI is calculated before financing costs; mortgage payments are a financing expense, not an operating expense.
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