California Real Estate Practice Exam 2025 – 400 Free Practice Questions to Pass the Exam

To determine the percentage return on the investor's investment, we first need to break down the financials involved in this scenario. The investor purchased a property for $100,000 and made a down payment of $10,000, financing the remaining $90,000 through a loan.

The investor received a 9% gross return on the purchase price, which amounts to:

\[ 9\% \text{ of } \$100,000 = \$9,000.\]

The interest expense on the loan amount of $90,000 is also 9%, calculated as follows:

\[ 9\% \text{ of } \$90,000 = \$8,100.\]

Now, to find the net income generated from the investment, subtract the interest expense from the gross return:

\[ \$9,000 - \$8,100 = \$900.\]

Next, to find the return on investment percentage, divide the net income by the initial investment (the down payment):

\[ \text{Return on Investment} = \frac{\$900}{\$10,000} = 0.09 \text{ or } 9\%.\]

It’s important to note this calculation aligns with the gross return but does not reflect an