Analyzing Your Real Estate Knowledge

71 Replies

@Alex Boyce i made a 91% as well but the mortgage calculation was 

Price ($150,000) x 75% LTV =($112,500) and multiply that by the 6% interest and that's how i got $6,750 as the annual payment. Of course divide by 12 to get $562.50 as monthly payment

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can someone please help me with question #3 about COC return that I'm currently on right now having a hard time figuring out how they got 18% if someone could please walk me through it.

@Joshua D.

NOI = 25000 + 1000 - 2500 -10000 =13500

Less your interest only loan payment (150000 * 75% LTV = 112500 loan * 6%) 6750

NOI - loan pmt = return
13500 - 6750 = 6750

Cash investment = (1-75%) * 150000 = 37500

COC return = return/your cash investment
6750/37500 =18%

I got a 100% on the quiz. The cap rate stuff scared me because I thought I was unsure of my knowledge but if you read each answer you can deduce the correct one. Great quiz.

91% - missed the cash-on-cash question at 75% LTV interest only. I gathered this info:

6,750 interest on int only loan @ 6%
13,500 NOI (26,000 rent/other income - 12,500 expenses)
6,750 income (NOI - 6750 annual interest payments)
112,500 - amount of loan @ 75% LTV

How do I need to combine those to get the answer?

@Paul Doherty

Yes, so the problem assumes you get a loan @ 75% LTV.

Purchase Price * LTV% = loan amount

$150,000 * 75% = $112,500 =  loan amount

Therefore your cash investment is as follows:

$150,000- $112,500 = $37,500 = your cash investment  OR  

(1-75%) * $150,000 = $37,500 = your cash investment 

Bringing it full circle, your return/your cash investment = COC return

$6,750/$37,500 = 18%

There's a great book on this an many of the other calculations called "What Every Real Estate Investor Needs to Know About Cash Flow". I highly recommend it if you want to learn all these calculations.

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Nice little primer to help polish us new to BP and REI! I totally needed to look up some definitions but all seemed to fall in place with a little research for those weird answers! 91% Baby!

Being very green I'm actually pretty excited I made a 75% on that. I had on AH HA moment during one of the questions and everything finally clicked on how to figure out cap rates in real life and not on the BP calculators. Wonderful!

Hello i just took the test and got 90% Don't ask me how. I guess all that reading does pay off. Now I just got to go and find me a deal. Don't know what is holding me back . I got to have at least one deal this year . That's my goal ok  thanks

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