What is the interest on a $15,000 loan at 6% annual interest for 4 years?
Interest = Principal × Rate × Time = 15,000 × 0.06 × 4 = $3,600
Define Depreciation
The reduction in property value due to wear , age and market decisions
What is the Simple interest formula
P x R x T ( Price, Rate, Time )
Define Rental Yield
A key metric used by real estate investors to gauge the potential return on their investment property
Define Property Value
Property value represents the price a potential buyer is willing to pay for a specific piece of real estate.
What is the algebraic formula for ROI
( Net profits / Total Investment ) x100
A vacation rental generates $36,000 per year. The property’s market value is $450,000. Annually, how much does the property generate as a percentage of its value?
Annual Return = (Annual Income / Property Value) × 100 = (36,000 / 450,000) × 100 = 8%
A person buys a storefront for $150,000 and sells it for $190,000 after all expenses. What is the net profit and ROI?
Net Profit = $190,000 - $150,000 = $40,000. ROI = (40,000 / 150,000) × 100 = 26.67%
What is the depreciation formula
Purchase Price - Salvage Value / Useful life
Define Compound Interest
Interest earned on both principle and previously accumulated interest
What is the algebraic formula for Rental Yield
( Annual Rental Income / Property Value ) x100
A home purchased for $180,000 appreciates in value to $225,000 in 6 years. How much did the property appreciate by?
Appreciation = $225,000 - $180,000 = $45,000
An office building costs $600,000 and has a useful life of 30 years, with a salvage value of $100,000. How much does the property depreciate per year?
Annual Depreciation = (Cost - Salvage Value) / Useful Life = (600,000 - 100,000) / 30 = $16,667 per year
Define ROI
Return on investment