Net Operating Income & Gross Rent Multiplier: Definition & Calculation


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question 1 of 3

Which of the following is the correct formula for the total cash flow statement?

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1. If a property is worth $200,000 and an investor expects to be able to earn a net operating income of $15,000 a year, what is the cap rate?

2. Which of the following expenses are not included in calculating net operating expenses?

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About This Quiz & Worksheet

Real estate investment analysis involves several mathematical formulas. You'll be asked questions about several concepts, including the cash flow formula, capitalization rate (cap rate), net operating expenses and the rate of return formula.

Quiz & Worksheet Goals

You'll be challenged to:

  • Identify a true statement regarding the correct total cash flow formula
  • Solve a practice problem by calculating the cap rate
  • Determine an expense that's not included when someone calculates net operating expenses
  • Know conditions that change the cap rate
  • Define the rate of return formula

Skills Practiced

This quiz will help you practice the following skills:

  • Knowledge application - use what you know about net operating expenses to determine the type of expense that isn't included when calculating them
  • Problem solving - use acquired knowledge to solve a cap rate practice problem
  • Defining key terms - ensure you can accurately define the formula for rate of return

Additional Learning

Read the related lesson called Net Operating Income & Gross Rent Multiplier: Definition & Calculation to get a more comprehensive view of these concepts. The lesson will help you:

  • Define cash-on-cash return and gross rent multiplier
  • Learn how the total return on investment is calculated
  • Understand the importance of real estate investment analysis