Real Estate Investing Property Analysis 2

Question 1

Cap rate (capitalization rate) is calculated by:

Accepted Answer

Net Operating Income ÷ Property Value

Answer

Purchase price ÷ rental income

Answer

Gross rent ÷ expenses

Answer

Mortgage payment ÷ property value

Question 2

The 1% rule in real estate investing suggests:

Accepted Answer

Monthly rent should be at least 1% of purchase price

Answer

Spend 1% on repairs annually

Answer

Properties appreciate 1% monthly

Answer

Vacancy rate should be under 1%

Question 3

Cash-on-cash return measures:

Accepted Answer

Annual pre-tax cash flow relative to total cash invested

Answer

Total property appreciation

Answer

Gross rental income

Answer

Property tax rate

Question 4

Net Operating Income (NOI) is calculated as:

Accepted Answer

Gross income - operating expenses (excluding debt service)

Answer

Gross rent - mortgage payments

Answer

Purchase price - down payment

Answer

Total income - all expenses including mortgage

Question 5

A property with a higher cap rate compared to similar properties may indicate:

Accepted Answer

Higher risk or potential problems

Answer

Lower risk

Answer

Better location

Answer

Newer construction

Question 6

The Gross Rent Multiplier (GRM) is:

Accepted Answer

Property price ÷ Annual gross rent

Answer

Annual rent × 12

Answer

Monthly rent ÷ expenses

Answer

NOI × cap rate