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Flashcards in Real Estate Mathematics Deck (18)
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1
Q

Commission

A

A sum due a real estate broker for services in that capacity.

2
Q

Points

A

Equal to 1% of a loan amount. For example, 1 point on a $100,000 is equal to $1,000

Calculating Points Ex:
Problem: If the sales price is $120,000 and the bank is lending 75% LTV, how much is the closing cost if the bank is charging 2 points at closing?

SOLUTION:
Closing Costs = Loan Amount x points%

120,000 x 0.75 = $90,000 (loan amount)
$90,000 x 0.02 = $1,800 (closing costs)

3
Q

Calculating Commissions

A
  1. Amount of commission eared
  2. Commission Rate
  3. Final Sales Price

FORMULA:
Commission Earned = Final Sales Price x Commission Rate
Final Sales Price = Commission Earned / Rate
Commission Rate = Commission earned / final sales price

4
Q

Calculating Interest Rate

A

Interest rates determine how much money is owed on a loan (Interest rate = cost of borrowing money)

FORMULA: 
Amount Owed (on loan) = Principle Balance x Annual Interest Rate
5
Q

Calculating Appreciation

A

Ex: If the property is currently worth $250,000 and appreciates at 3% per year, how much will the property be worth in 3 years?
ex: property value: $250,000 annual appreciation: 3%

SOLUTION: 
Property Value (yr 3) = Property Value x % increase each year

FORMULA: Future Value = Present Value x (1+appriciation rate) ^number of years

$250,000 x 1.03 = $257,500
$257,000 x 1.03 = $265,225
$265,225 x 1.03 = $273,181.75

6
Q

Calculating Depreciation

A

Ex: If the property is currently worth $550,000 and it depreciates at 5% per year, how much will the property be worth in 3 years?
ex: Property Value: $550,000
Annual Depreciation rate: 5%

SOLUTION: 
Property Value (year 3) = Property Value x % decrease each year 

FORMULA: FV = PV x (1-depreciation rate) ^ # of years

ex depreciation rate: 1-0.05 = 0.95
$550,000 x 0.95 = $522,500
$522,500 x 0.95 = $496,375
$496,375 x 0.95 = $471,556.25

7
Q

Acre

A

A measure of land equaling 43,560 square feet.

8
Q

Acre

A

A measure of land equaling 43,560 square feet.
1 Square Mile = 640 Acres

FORMULA: Lot Acreage = Lot Area/1 Acre

Question: We have a lot that is 13,068 sq feet. How many acres is the plot of land?
13,068/43,560 = 0.3 Acres

9
Q

Hectare

A

Equal to 10,000 square meters

10
Q

Hectare

A

Equal to 10,000 square meters = 2.47 Acres

11
Q

Calculating Irregular Lot Sizes

A
  1. Break shape down into square, rectangles and triangles
  2. Calculate the areas of each shape
  3. Add together the area of each shape
12
Q

Basic Mortgage Qualifying

A

A bank will only lend money up to a certain % of the purchase price or Appraisal Value, whichever is LESS

13
Q

Principal

A

A sum of money lent or invested on which interest is paid

14
Q

Interest

A

A fee paid by the borrower of a loan as a form of compensation for the use of money

15
Q

Rates

A
  1. Real Property Transfer Tax
    -Typically expressed in $/1,000
    FORMULA:
    Transfer Tax Amount = Rate x Property Sales Price
  2. Mortgage, Recording Tax
    -Mortgage recording Tax = Tax Rate x Mortgage Amount
    Ex: purchase price $325,000 mortgage: LTV 75%
    What’s the recording tax???
    Mortgage = 325,000 x 0.75 = $243,750
    2.05/100 = 0.0205
    243,750 x 0.0205 = $4,996.88
  3. Real Property Tax
    FORMULA:
    Annual Taxes = Assessed Value x Tax Rate

Ex: If the property assessed value is $750,000 and the tax rate is $2.25/$100 of assessed value, what are the annual taxes paid on the property? = $16,875

16
Q

Net Income

A

The result of subtracting expenses from income.

17
Q

Gross Income

A

Total income from property before any expenses are deducted

18
Q

Commission

A

A sum due to a real estate broker for services in that capacity