Wisconsin Real Estate License Real Estate Math and Calculations 2

Question 1

An investment property generates $36,000 in annual net operating income and is valued at $400,000. What is the capitalization rate?

Accepted Answer

9%

Answer

Cap rate = NOI ÷ value: $36,000 ÷ $400,000 = 0.09 or 9%.

Question 2

A rental property sells for $300,000 and generates $2,500 per month in gross rent. What is the gross rent multiplier using monthly rent?

Accepted Answer

120

Answer

GRM (monthly) = sale price ÷ monthly rent: $300,000 ÷ $2,500 = 120.

Question 3

A buyer takes out a $200,000 mortgage at 5% annual interest. What is the interest charge for the first month?

Accepted Answer

$833

Answer

Monthly interest = $200,000 × 0.05 ÷ 12 = $833.33.

Question 4

A buyer pays 2 discount points on a $180,000 mortgage loan. How much are the points?

Accepted Answer

$3,600

Answer

One point equals 1% of the loan amount; 2 points = 2% × $180,000 = $3,600.

Question 5

A buyer's gross monthly income is $6,000. Their front-end debt-to-income ratio should not exceed 28%. What is the maximum allowable monthly housing payment?

Accepted Answer

$1,680

Answer

$6,000 × 0.28 = $1,680 maximum monthly housing payment.

Wisconsin Real Estate License Practice Test

Wisconsin Real Estate License Practice Test

Wisconsin Real Estate License Real Estate Math and Calculations 2