An investor buys a duplex for $320,000. Each unit rents for $1,200 per month. Annual expenses total $12,000. What is the investor's annual cash-on-cash return if they made a $64,000 down payment and annual debt service is $15,600?
Correct Answer
B) 1.88%
Annual gross income = $1,200 × 2 × 12 = $28,800. NOI = $28,800 - $12,000 = $16,800. Before-tax cash flow = $16,800 - $15,600 = $1,200. Cash-on-cash return = $1,200 / $64,000 = 0.01875 = 1.88%.
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