Math

Question 1

Commission Formula

Answer 1

Commission = (house selling price) x (commission percentage)

Question 2

Simple Interest Formula

Answer 2

Interest = (principal amount) x (rate of interest) (time)

Question 3

28/36 Rule or “The Mortgage Rule of Thumb.” Formula

Answer 3

Housing costs to qualify for most loans= (gross monthly or annual income) x (.28)

Question 4

Property Tax Rate

Answer 4

Property Tax Rate = (assessed value) x (mill rate)

Question 5

Assessed Value

Answer 5

Assessed Value = (assessment rate) x (market value)

Question 6

1 mill

Answer 6

1 mill = equal to 1/1,000th of a dollar or $1 in property tax.

Question 7

1 Acre in square feet

Answer 7

1 Acre = 43560 square feet

Question 8

1 Mile in linear feet

Answer 8

1 Mile = 5,280 linear feet

Question 9

1 square yard in square feet

Answer 9

1 square yard = 9 square feet

Question 10

1 cubic yard in cubic feet

Answer 10

1 cubic yard = 27 cubic feet

Question 11

1 square mile in acres & sections

Answer 11

1 square mile = 640 acres = 1 section

Question 12

1 acre in square feet

Answer 12

1 acre = 43,560 square feet

Question 13

Area of triangle

Answer 13

1/2 base X height

Question 14

Area of trapezoid

Answer 14

(average of both base lengths) X height

Question 15

Annual gross rental income

Answer 15

(monthly rental income) x (12)

Question 16

Gross Rent multiplier equations (GRM)

Answer 16

Sales price = monthly rental income X GRM

Monthly rental income = sales price / GRM

GRM = sales price / monthly rental income

Question 17

Gross Income Multiplier equations (GIM)

Answer 17

GIM = sales price / annual income

Sales price = annual income X GIM

Annual income = Sales price / GIM

Question 18

Coast approach formula

Answer 18

Value = Land Value + (improvements + capital additions - depreciation)

Question 19

Depreciation

Answer 19

Annual depreciation = beginning depreciable basis / depreciation term (number of years)

Question 20

Depreciable basis

Answer 20

Initial property value + any capital improvements - land value

Question 21

Income capitalization approach

Answer 21

Value = annual net operating income / capitalization rate

Capitalization rate = annual net operating income / value

Annual net operating income = value X capitalization rate

Question 22

Net operating income (NOI)

Answer 22

NOI = potential gross income - vacancy loss + other income - operating expenses

Question 23

Interest rate equation

Answer 23

interest rate = annual payment / loan amount

Question 24

Interest only loan

Answer 24

Total interest - loan amount X rate X term in years

Question 25

Fully amortized loan

Answer 25

Total interest = (monthly PI payment X 12 X term) - loan amount

Question 26

Amortization calculation

Answer 26

Step 1: Principle X Interest = annual interest Step 2: Annual interest / 12 months = 1st month's interest Step 3: Monthly payment - 1st (or any) month's calculated interest = principle paid Step 4: Principle balance - principle paid = new principle balance

Question 27

Loan constants

Answer 27

Monthly Payment = (loan amount / 1000) X loan constant Loan amount = (Monthly payment / loan constant) X 1000 Loan constant = (Monthly payment / loan amount) X 1000

Question 28

Loan to value ratio (LTV)

Answer 28

LTV ratio = loan / Price (value) Loan = LTV ratio X price (value) Price (value) = Loan / LTV ratio

Question 29

Income ratio qualification

Answer 29

Debt ratio = (housing expenses + other debt payment) / monthly gross income Housing expenses = (monthly gross income X debt ratio) - other debt payments

Question 30

Appreciation

Answer 30

Total appreciation = current value - original price Total appreciation rate = total appreciation / original price Average annual appreciation rate = total appreciation rate / number of years One year appreciation rate = annual appreciation amount / value at beginning of year Appreciated value = beginning value X (1 + annual rate) X (1 + annual rate) ... for the number of years in question

Question 31

Rate of return

Answer 31

Rate = income / value Value = income / rate income = value X rate

Question 32

Equity

Answer 32

Equity = current market value - current loan balance

Question 33

Net operating income (NOI)

Answer 33

**The gross income minus all operating expenses NOI = potential rent - vacancy loss + other income - operating expenses

Question 34

Cash flow

Answer 34

**The mount of money moving in and out of a business in a month Cash flow = (NOI - debt services) where debt services is PI payment

Question 35

Capital gains and adjusted basis

Answer 35

Capital gain = amount realized - adjusted basis, where amount realized = sales price - selling costs Adjusted basis = beginning basis + capital improvements - total depreciation Total depreciation = (beginning depreciable basis / depreciation term in years) X years depreciated Depreciable basis = initial property value + capital improvements - land value

Question 36

Tax liability

Answer 36

Tax liability = (NOI + reserves - interest expense - depreciation) X tax bracket

Question 37

Return on investment

Answer 37

**The ratio between the net profit and the cost of investment ROI = NOI / Price

Question 38

Return on equity

Answer 38

**The ratio between the cash flow and equity in a property ROE = Cash flow / equity

Question 39

Percentage lease rent

Answer 39

**When the landlord receives a percentage of gross sales or net profit as the rental payment for a property Monthly percentage rent = sales times % sales charged

Question 40

Rent escalation

Answer 40

**A way to determine the dollar amount of a rent increase New rent = current rent X (100% + escalation rate)

Question 41

Mill rates

Answer 41

**One tenth of one cent 1 mill = $.001 A mill rate of 1 mill per $1000 = .1% A 1% tax rate = 10 mills Tax = (taxable value / 1000) X mill rate

Question 42

Tax base

Answer 42

**Total tax assessed value of all real property in a particular jurisdiction Tax base = assessed valuations - exemptions

Question 43

Tax rate, base, and requirement

Answer 43

Tax rate = Tax requirement / tax base Tax base = tax requirement / tax rate Tax requirement = Tax base X rate

Question 44

Commission splits

Answer 44

Total commission = sales price X commission rates Co-brokerage split = total commission X co-brokerage percent Agent split = Co-brokerage split X agent percent Broker split = Co-brokerage split - agent split

Question 45

Seller's Net

Answer 45

**The amount the seller profits after paying the expenses involved in the sale (commission rate, closing costs, and any existing mortgage) Seller's net = sales price - (sale price X commission) - other closing costs - loan balance

Question 46

Minimum contract price

Answer 46

**Lowest amount the seller can sell the property for and still cover all of his expenses (commission, closing costs, and existing mortgage) and receive the desired proceeds at closing Minimum contract price = (Desired seller's net profit + loan payoff + closing costs = seller's gross profit) dividid by seller's % **In this case "seller's %" is 100% minus the commission percent

Question 47

Percentage of listing price calculation

Answer 47

**It's a ratio of the offer to the listing price Percentage of listing price = offer / listing price

Question 48

Earnest money deposit calculation

Answer 48

**Used to determine an appropriate amount of earnest money to include with an offer Deposit = offering price X required or market-accepted percentage

Question 49

Closing cost prorations

Answer 49

Monthly amount = annual amount / 12 Daily amount = monthly amount / 30 Proration = (monthly amount multiplied by the # of months) + (daily amount multiplied by the # of days)

Question 50

365 day method of prorations

Answer 50

Daily amount = annual amount / 365 OR monthly amount / length of month