CA, real estate math Flashcards
1
Q
What are common land measurements?
A
Mile
Acre
Square foot
Yard
Rod
Hectare
2
Q
Inches, feet in miles
A
1 yard = 3 feet
One rod = 16 1/2 feet
1 mile = 5280 feet
1 square ft.= 144 square in.
1 acre = 43,560 ft.²
1 hectare = 2.47 acres.
3
Q
And an improved lot is advertised at 130,680 ft.² how many acres is this?
A
3 acres
Take the total feet and divided by 1 acre which is 43,560 = 3 acres
4
Q
Area formula for a rectangle
A
Length x width
17 inches x 24 inches equals 408 ft.²
5
Q
Area formula for a triangle
A
Half the base x height
If the base is 60, divide that and half = 30
If the height is 70 x 30 = 2100 in square feet
6
Q
A property has a rectangular patio that is 10’ x 15’. What is the area of the patio?
A
150 ft.²
10 X 15 = 150
7
Q
The property are looking to list has an addition that was built years ago. Edition master bedroom measures 20’ x 30’ any master bathroom measures 10’ x 10’. What is the total square footage of the entire addition?
A
700 ft.²
20 X 30 = 600
10 X 10 = 100
8
Q
Land acquisition costs
A
Cost of purchase = land area x cost per unit
$75,000 = 5 acres x $15,000 per acre
The cost of a parcel of land is $.75 per square foot
To figure this out, you have to take the acres and find the square feet.
1 acre equals 43,560 ft.²
If the client wants to acres multiply 43,560 x 2. = 87,120 feet x .75= $65,340
9
Q
A landowner has 300 acres of land. He’s parcel in the land and selling it for two dollars per square foot. James wanted wants to purchase 2 acres. How much will the cost be
A
$174,240
1 acre acres 43,560 x 2 = 87,120 ft.² x 2 dollars per square foot = $174,240
10
Q
Loan-to-value ratio LTV
A
The ratio of a loan amount to the value of the property being purchased
If the loan to value ratio exceeds 80%, the borrower will likely have to purchase private mortgage insurance for the lender
11
Q
LTVR loan to value ratio equation
A
LTVR =(loan amount ÷ home value) x 100
Home purchase price $100,000, buyer puts down $10,000, this is a 90/10 loan
LTVR = $90,000 ÷ $100,000 x 100 = 0.9.x 100 = 90
Buyer puts down 20% on a house with purchase price $100,000 set an alone would be $80,000
LTVR = $80,000 ÷ $100,000x 100 = 0.8×100 = 80.
12
Q
Loan origination fee
A
Loan amount x loan origination percentage
$100,000 loan lender charges 1% loan origination fee
Move percentage to a decimal two places to the left
What percent is 0.01 as a decimal.
Loan origination fee = $100,000 x 0.01 = $1000.
13
Q
360,000 financed with a $40,000 down payment
A
90/10 LTVR
360,000 ÷ 40,000 =0.9.x 100 = 90
10 LTVR
14
Q
Loan-to-value ratio
A
Loan amount ÷home value x 100
15
Q
Property is valued at $500,000 with a $50,000 down payment, financing $450,000
A
90/10 LTVR
500,000÷450,000 = 1.111.
Move the decimal to the left two times 0.1.
0.1× 100 = 10
16
Q
Purchase price $600,000 and financing $480,000
A
80/20 LTVR
Loan amount 480,000 divided by home value $600,000 = 0.8.
0.8× 100 = 80
17
Q
Sale price $300,000 financing $180,000
A
60/40 LTVR
$180,000 divided by $300,000 = 0.6×100 = 60.
18
Q
Do you have a buyer who’s purchasing a home priced at $385,000 and appraised at $380,000. The bank has a 90/10 loan to value ratio and will charge in origination fee of 1% at closing. Calculate the loan origination fee.
A
$3420
Appraised amount is $380,000, 90% of that equals 342,000 x 0.01 = $3420.
That is one percent of the loan amount
19
Q
Mortgage or loan origination points
A
These are different from discount points. Discount points are essentially prepaid interest you pay at the beginning to drive down your overall monthly payment on a mortgage.
One point = 1% of loan amount
Loan amount x points = points amount
$100,000 80/20 loan - lender charges two point
Loan around $80,000 times .2 = $1600 is the points amount that must be paid at closing.
20
Q
What does a point equal?
A
1% of loan value
21
Q
Bob and Mary are financing $160,000 for a new home. The lender will approve an interest rate of 6%, if Bob and Mary Kay to discount points at closing how much is this?
A
$3200
$160,000 x 0.02 equals $3200.
One point equals 1%
Two points is 2% = 0.02.
Remember to multiply and not divide
22
Q
How many square feet are in 1 yard
A
Three
23
Q
How do you calculate the area for a triangle?
A
Multiply half the base times height
24
Q
Property is being sold for 15,000 an acre how much will 5 acres cost
A
$75,000
15,000×5
25
Jane is purchasing a property for $310,000 and plans to finance 250,000 what is the loan to value ratio round to the nearest percentage?
79 percent
81%
83%
85%
81%
$250,000 divided by $310,000 equals 0.80.
26
One while contains how many feet
5280
27
Define clients obtain an 80% loan on their $600,000 home. At closing decay 8250 for points. How many points did the buyers pay to lower the interest rate
0.017.
1.17.
1.72
7.2.
1.72.
I guess this problem so I need to find out how to do this problem. Please ask dad.
28
Another closing appointment is approaching. The clients are purchasing $160,000 home if they have a down payment of 25% in the bank charges two points at closing, how much are they paying in points?
$2400
$2450
$3200
$2400
First find the loan around $160,000 multiplied by .75 = $120,000.
From their multiply, the loan amount by two points, or 2%
120,000×0.02 equals 2400.
Practice this I got this wrong
29
Your buyer client Heather just signed a purchase agreement for 520,000 home
The LTVR is 60% how much is Heather putting down on the purchase?
208,000
$220,000
$300,000
$312,000
$208,000
Hey 60% LTVR means that Heather is financing 60% of her purchase and putting down 40%. 40% of $520,000 is $208,000.
520,000×0. 40.
Study this I got this wrong
30
Basic mortgage qualification
Gross income - minus tax expenses = net income
Housing debt – to – income ratio = 25% – 28%
Total debt – to – income ratio 33% – 36%
Gross income $5000 add monthly expenses $500 a month
Multiply the housing debt of 25% (0.25 x $5000 = $1250)
Take the total debt and multiply that by the ratio ( $5000 x 0.33 = $1650)
31
Gross income
Income before expenses are deducted
When Carrie computed her gross income, it looked fantastic, but by the time she deducted her expenses and found her net income, she thought, now that’s gross
32
Net income
Income after expenses have been deducted
Barry’s gross income was $50,000 but once he deducted for expenses his net income was only 28,750
33
Debt to income ratio
Debt to income ratio used by mortgage lenders is calculated by dividing the borrowers recurring monthly, then by the borrowers total monthly income
Because Janice debt to income ratio was too high. She didn’t qualify for a mortgage.
34
What does the debt to income ratio include DTI
Principal, interest, taxes, and insurance plus any HO a fees
Does not include all borrowers expenses
35
What is a typical low end of the housing ratio to qualify for a conventional loan?
22
25
28
30
25
To qualify for a conventional loan, the minimum is 25%. So the lender is using 25% as a threshold, the buyers house payment can’t exceed 25% of gross income.
36
What’s the typical high end of housing ratio to qualify for a conventional loan?
25
28
30
32
28
To qualify for a conventional loan the housing ratio generally can’t exceed 25 to 28%. So if the lender is using 28 as the threshold, the borrowers house payment can’t exceed 28% of gross income.
37
What’s the typical total debt to income ratio to qualify for a conventional loan?
28 to 30
30 to 35
33 to 36
35 to 38
33 to 36
To qualify for a conventional loan the total debt to income ratio generally can’t exceed 33% to 36%. This means that all the borrowers that. (house, car, loans, etc..) can’t exceed 33 to 36 of the gross income
38
How much can a young couple buy a house for if they earn a gross monthly income of $3600 and Inna income of $2900. The lender the couple is working with is conservative an only funds loans at a low end of the housing debt to income ratio. How large of a house payment can the couple afford according to their lender?
725
$800
$850
$900
$900
Take the gross income $3600 and multiply by 0.25.
39
A couple has a debt that equals $296 a month. With a gross income of $3600 I’m assuming they found a lender that uses the high end of the total debt to income ratio, what is the maximum house payment they can afford?
$900
$1000
$1100
$1296
$1000
What’s the buyers at the top of the total debt to income ratio leave this question to the expert (lender) who will tell the borrowers what they qualify for
40
Determine the ratio if the clients total monthly debt of $1000 and a gross income of $3500 and wants to figure out their debt to income ratio? Work backwards
28.6%
$1000 ÷ $3500 equals 0.2857.
41
What’s included in a total debt to ratio a.k.a. debt to income ratio, total obligation, back, and ratio?
All recurring, or installment, debt that will last longer than 10 months, such as monthly mortgage, Car, credit, and loan payments
42
How to calculate total debt ratio?
Total of monthly debt obligations/monthly gross income x 100
43
What’s included in the housing ratio, a.k.a. front and ratio
Monthly housing obligation, principal, interest, taxes, insurance, homeowners or condo association, fees
44
How do you calculate the housing ratio
Principal plus interest plus taxes plus insurance plus association fees/monthly gross income x 100
45
What’s a loan to value LTV ratio?
Amount being borrowed compared to the value of the property, either the appraised value or sales price, which ever is less
46
How do you calculate LTV?
Amount, financed/property value x 100
47
What’s a loan origination fee?
Fees charged by a lender for processing or originating a loan
48
How do you calculate a loan origination fee?
Loan amount x origination, right (divide a percentage by 100 to obtain the rate, so and origination fee of 2% is the same as 0.02.)
49
Annual interest amount
Loan balance x interest rate = annual interest amount
loan balance of $70,000 x 6% (0.065) = $4550 for annual interest amount
To figure out monthly interest annual amount $4550 ÷12 = $379.17
This is only a partial part of the payment, the rest is principal, taxes, and insurance
Flip The formula to figure out the interest rate:
Annual interest amount ÷loan balance = interest rate
$7000 annual interest amount ÷$140,000 for the loan balance = 0.05 interest rate = 5%
50
Calculating the interest amount
Monthly interest amount = (loan balance x interest rate) ÷number of payments annually
This is an estimate. Lender will provide an amortization table, along with other information that will be more accurately depict. The amount of interested buyer will pay.
51
You’re working with buyers who are preapproved for a loan up to $150,000. If they estimate paying $625 per month toward interest, what interest rate are they assuming?
4%
5%
6%
7%
5%
Take $625 x 12 months = 7500÷$150,000 = 0.05 move the decimals over to the left and that makes it 5%
52
Debt service calculation
Debt service = monthly payment x 12
Brenda pays $1800 per month on her mortgage, so her debt service calculation would be 1800×12 = $21,600
53
Principal
Principal is the actual amount borrowed
If Joe Barrows $120,000 to buy a house, the principal amount of his house loan is $120,000
54
Entress
Interest is the cost of borrowing money from someone else.
If Joe borrows money from Larry’s lending, Larry will charge Joe interest for using Larry’s money. Loan interest is slated as an annual percentage example 4.5%.
55
Term
The long-term is the amount of time over which it will be paid. If Joe’s loan is 30 year mortgage, the loan term is 30 years.
56
Amortization
Amortization is the process of paying off the loan overtime.
Every monthly loan payment made on a mortgage loan, reduces the amount of principle owed, and also pays the portion of interest owed for the past month. A typical mortgage loan is designed so that the end of the loan term the entire principal balance is paid off. This is called a **fully amortized loan**.
**Negative amortization** means that the monthly payment, a borrower makes isn’t sufficient to fully pay off the loan at the end of the loan term. Example would be a balloon mortgage, paying the lump sum at the end of the loan term.
57
The process of paying a loan off overtime
Amortization
58
The length of the loan
Term
59
The cost of borrowing money from someone else
Interest
60
The amount actually borrowed
Principal
61
Amortization monthly payment calculation
Loan amount ÷1000 x factor = monthly payment
Loan about $200,000 ÷1000 = 200 x factor off of chart, 5%(5.36822.) = $1073.64.
62
I’m bound to be sent for Payment
Schedule payment/total amount
63
Loan balance prior to the monthly payment being applied
Beginning balance
64
Loan balance after payment is applied
Ending balance
65
Amount of payment that will be paid towards the interest
Interest
66
Rate of interest for the loan
Annual interest rate
67
Amount of payment that will be paid towards interest
Interest
68
Amount of payment that will be applied to the loan balance
Principal
69
A buyer with 15 year, $250,000 loan at a 5.5% interest rate as a monthly principal and interest payment totaling $2042.71. What’s the total amount the borrower will pay back over the life of the loan.
$250,000
$30,640.65
$360,687.80
$735,375.60
$360,687.80
To find the total amount, paid back, multiply the monthly ($2042.71) by the total number of payments (180 = 12 payments/year times 15 years). This total paid back is $367,687.80.
70
A borrower has a 30 year, $500,000 loan with an interest rate of 6.25%. His monthly principal and interest payment is $3078.59. What’s the total amount of interest he’ll pay over the course of the loan.
$500,000
$608,292.40
$750,000
$750,000
First, multiply the monthly payment by the total number of payments. Then subtract the original loan value. :
$3078.59 x 360 equals $1,108,292.40 - $608,292.40
71
A borrower has a 30 year, $500,000 loan with the interest rate of 6.25%. His monthly principal and interest payment is $3078.59. What’s the total amount he’ll pay over the life of the loan?
$1,108,292.40
500,000
$608,292.40
$750,000
To find the total amount paid back multiply the monthly payment by the total number of payments $3078.59 times 360 equals $1,108,292.40
72
A buyer with a 30 year, 750,000 loan at 5.75% interest rate has a monthly principal and interest payment totaling $4360.80. If $3593 and 75 is interest how much is applied to the principal
$251.66
$3593.75
$$783.05
$783.05
Half interest the rest is principal
73
Traditionally, lenders qualify, mortgage rules. Use a range of percentages to qualify for both the housing debt to income ratio, and the total debt to income ratio. What are those ranges?
25 to 28% for housing, 33% to 36% for total debt
74
If a buyer with a 20 year, $419,000 loan at a 4.25% interest rate as a monthly principal and interest payment totaling $2595.59 is $1483 and 95 is interest, how much is a Park toward the principal for the payment?
$1110.64
$1246.10
Subtract $2594.59 from $1483.95
Equals $1110.64
75
Tim’s gross monthly income is $3800 and he has no monthly debt payments. The lender qualifies ratios are 28% for the housing ratio and 36% for the total DTI ratio. What’s the maximum housing payment Tim can afford
$1064
$1297
$1368
$1064
Calculate the debt and housing ratio is the buyers need to meet both lending ratios.
While Tim qualifies for a payment of $1368 under the total DTI, he only qualifies for 1064 under the housing ratio
$3800 x 28%
Income X housing ratio percent
76
A buyer with a 15 year, 250,000 loan at a fixed 5.5% interest rate as a monthly principal and interest payment totaling $2042.71. What is the total amount of interest the borrower will pay over the course of the loan.
$117,687.80
735,375.60
$117,687.80
First multiply the monthly payment $2042.71 by the total payment 180 = 12 payments/year for the 15 years. The total paid back is $367,687.80. Then subtract the original loan value $367,687.80 -$250,000 = $117,687.80
77
Interest rate question:
Mr. Smith has 90 a day personal note in order to borrow $9000, on which he paid a total interest of $325. What was the annual interest rate on Mr. Smith’s note?
Formula : Annual interest ÷amount loaned
Mr. Smith paid $325 for 90 days. 90 days is three months. Three months is 1/4 of a year.
90 days is $325 x 4 quarters equals $1300 annual interest rate
Interest rate = annual interest $1300 ÷ amount loan $9000 = interest rate, 0.1444.
Move over, decimal point = 14%
78
Years in quarters
First quarter January through March 90 days
Second quarter April through June 90 days
Third quarter July through September 90 days
Fourth quarter October through December 90 days
90 days x one year( 4 quarters) =
79
Tom obtains a loan to purchase a property for $250,000. He puts down $50,000 as a down payment what is the loan to value ratio
LTV loan-to-value ratio (loan) ÷ (value) = ratio
Sale price is $250,000
Minus down payment 50,000
= $200,000
$200,000 ÷$250,000 = .80 or 80% LTV
80
The loan amount is $400,000 in the LTV ratio is 80%. What was the sale price of the property?
Formula: dept ÷LTV = sale price
$400,000 ÷80% = $500,000. Sale price
81
A buyer anticipates a house payment of 1000 per month, with monthly home owner association fees of 150. The buyer also has a car payment of 400 per month if the buyer earns a monthly gross income of $5000, what’s the housing ratio?
20%
23%
28%
31%
23%
23% X $5000 = $1150
The housing ratio only includes house, payment association, fees, and I don’t think other debts
82
Grant and Adela arrange a 150,000 loan at 4.5% annual interest with their lender. What’s the monthly interest amount?
$550.25
$562.50
$570
$575.75
$562.50
0.045 or 4.5% x $150,000 = $$6750 ÷12 months = $562.50
83
You’re working with buyers who are preapproved for a loan as much as $200,000. Assuming they lock in a 5.25% interest rate at closing, how much of the first payment will go towards interest?
$824
$825
874
$875
$875
5.25% x $200,000 = $10,500 ÷ 12 months = $875
84
Phoebes gross monthly income is $4200 and she has $360 in monthly non-housing debt payments. The lenders qualifying ratios are 28% for the housing ratio and 36% for the total DTI ratio. What’s the maximum housing payment she can afford
$1075
$1152
$1176
$1512
$1152
The maximum house payment is the lesser of the amounts calculated using both ratios
DTI : $4200x .36 = $1512.
$1512 -$360 = $$1152.
Housing ratio : $4200 x .28 = $1176.
Phoebe is maximum payment is $1152
85
Property tax
Assessed value x tax rate = annual property tax
Assessed value on home is 175,000 x tax rate $1.25 per 100 (0.0125.) = $2187.50.
86
A buyer is purchasing a property for $120,000, which has an assessed value of $130,000. If the tax rate is $1.75 per $100, what will the buyer pay annually in taxes?
$2100
$2275
$685.71
$2275
Take the assessed value $130,000 x $1.75 (0.0175)= $2275
87
Mills
Some areas assess taxes per meal instead of per $100
Remember that a male is assessed property value divided by 1000
Example would be if we had an assessed value of 130,000, Divide this by 1000 = 130
You are then multiply any rates written as per mille by this number?
88
I transfer tax
Is a tax that is applied whenever real property is sold or transferred
Paid by seller, but negotiable within the contract, and with some bank owned properties, the lender me, and says that the buyer pay the transfer tax
California tax rate is $.55 per $500, or $1.10 per $1000
In addition to county transfer tax, the city has a transfer tax $2.75 per $1000 in San Francisco
You would add the transfer county tax plus the city tax example $1.10+ $2.75 and multiply that by the property value
89
A property in California sold for 500,000. What is the transfer tax amount at the property is not subject to city transfer taxes
$275
$550
$1100
$550
Take 500,000 and make it into thousands 1000 = 500 x $1.10 = $550
90
A property in California sold for $800,000. What is the county transfer tax that would apply to this transaction
$1760
$880
$440
$880
800 multiplied by $1.10 equals $880
91
He property that sold for $800,000 is located in the city with a transfer tax $2.75 per $1000. What is the amount of the city transfer tax
$440
$880
$2200
$2200
Take 800 x 2.75 = 2200.
92
A property in California sold for $700,000. The property is located in a city that imposes a transfer tax at a rate of $3.30 per $1000. What is the total amount of transfer tax, between both county and city, for the property?
$385
$770
$2310
$3080
$3080
Takes 700 x ($1.10 + $3.30) $4.40 = $3080
93
Statutory year
Assumes that all months in the year have 30 days, calculations are made based upon a 360 day year
94
Taxes owed by seller:
Assume the closing is held on the last day of the month, the seller owns the day of closing, and you’re using a statutory year
Taxes owed ÷12 months = taxes owed per month and taxes owed per month x number of full months passed = accrued, taxes owed by the seller at closing
95
Cellar Angela’s property is assessed real estate taxes of $900 for the year. Closing is held on February 29. What amount does Angela owe for taxes accrued and not yet paid that will appear as a debt for the seller and a credit for the buyer at closing? Use the statutory year and assume that Angela owns the day of closing
$75
$150
$500
$750
$150
900÷12 = $75
$75 x 2 months = $150
96
Seller of Ricky’s property is assessed real estate taxes of $1400 for the year. Closing is held on August 15. If Ricky owns the day of closing, what is the amount that Ricky owes for taxes, accrued, and not yet paid based on the statutory here?
$800.05
$816.69
$871.15
$875.04
$875.04
Calculate the taxes per month $1400 ÷12 = $116.67,
then calculate the accrued taxes owed and not paid by the seller for the number of full months $116.67 x 7 = $816.69
Because you have a partial month you also have to calculate the taxes per day : $116.67 divided by 30 = $3.89
$3.89 x15 = $58.35. Add this to the taxes per month $816.69 + $58.35 = $875.04
97
Monthly rent for the property is $2100. The tenant won’t be moving into the property on the first of the month so the entire rent isn’t due. Instead, the lessor prorate the amount of the rent based on the number of days in the month, the tenant will occupy the property. Assuming the tenant will occupy the property for 17 days, and also assuming a 30 day month, how much is rent due?
$2000
$1190
$1000
$866.67
$1190
First find the daily rent rate by dividing $2100 by the number of days in a month 30. Then multiply this amount by the number of days the lesee he will occupy the property 17.
98
Commission
Sale price x commission percentage
$150,000 x 7% (0.07.) = $10,500
Find the percentage of commission : total commission received ÷value of house
$10,500 ÷ $150,000 = 7%
99
What two items do you need to calculate the total commission?
Sales price
Commission rate
100
How do you calculate commission?
Commission = sales price x commission rate
101
Do you have a property listed at $160,000. The commission rate listed in the listing agreement is 6%, which you will split evenly with the buyers representative. What does the property sell for if you earn a commission of $4500.
$164,000
$169,000
$75,000
$150,000
$150,000
Trick question listing price is irrelevant.
Figure out the total commission paid, split total commission paid is $9000. Then figure out the sales price would have a 6% commission that equals $9000.
$9000 ÷ by 0.06 = $150,000
102
You referred a buyer to a colleague in a neighboring state. The buyer found their dream home for a price of $325,000. A couple weeks after, he received a card with a check for $3250 as a thank you from your colleague. At what rate as a percentage, did your referral payoff?
1%
10%
.001%.
One percent
$325,000 divided by $3250 = 100 move the decimals over to places to the left 1.0%.
103
Can you set a target of $21,000 in total commission for the quarter? Assuming average total commission rate is 6% for each cell and you’ll likely split that evenly with the person representing the other party in the transaction, what is the total value in sales you must reach to hit your target.
$350,000
$600,000
$700,000
$700,000 ( $21,000 ÷ .03.)
If you are splitting 6% commission 50% with someone else, you’ll bring 3% of the sales price. To calculate how much you need to sell to earn $21,000 for the quarter, take $21,000 and divided by .03.
104
Estimating net to seller
Sellers are most concerned with a net proceeds from the sale
Net to seller = sales price x percent to seller (100% minus the commission percent)
$150,000 X (100% -7%) 93 or 0.93. = $139,500.
105
Your seller wants $47,500 after the 5% commission is paid, but before other expenses are closing costs or figured in. At what price does the home need to sell for the seller to net this amount?
$45,125
$47,500
$50,000
$52,500
$50,000
Find the sales price, take them out the seller wants to net and divided by 95% or .95, this amount is 100% minus the 5% commission.
$47,500 ÷95% or .95 = $50,000
106
The seller still owns $45,000 on her mortgage but wants to net at $50,000 after the mortgage and 5% commission are paid. What’s the minimum the house myself or to net the seller the desired amount?
$47,368
$52,631
$100,000
$102,500
$100,000
Take them out the seller wants to net plus the amount of the mortgage still owed $50,000 pause $45,000 and divided by 95% or .95. This amount is 100% minus the 5% commission rate.
107
Buyer in California is purchasing a property for $420,000. Only the county transfer tax applies to the property. What is the amount of the transfer tax
$462
California transfer tax is $1.10 per 1000 or $.55 per 500
Were using the thousands take 420 multiplied by $1.10 or 0.011 this is moving the decimals to the left two spots. = 4. 62 move the decimal signs back to the right $462.
108
Your seller wants to net $100,000 after the 5% commission is paid. Assuming no closing costs, at what price does the home need to sell for the seller to net this amount
$105,163.16
$105,263.16
$105,263.16
Take 100,000÷95% or 0.95 = $105,263.16.
109
The Simpsons are buying the Martin’s house for $415,000, and closing is set for March 15. The martins have a loan balance of 230,000 at a rate of 4.7% and have prepared property taxes. ($2506.) an insurance.($1400.), And they also have mortgage interest to consider. Using a 365 day proration method, calculate the. Amount the Simpsons will of the Martin’s at closing. Assume February has 28 days this year. The sellers own the day of closing.
$1997.62
Calculate daily rates for taxes to be : $2506 ÷365 = $6.87. The Martin’s pay the first 74 days.(January 1 – March 15.): 74.x $6.87 = $2506 -$508.38 = $1997.62 owed by the Simpsons homeowners insurance isn’t prorated between the buyer and seller. A homeowners insurance policy is an agreement between the insurance company and the policyholder, so any refund due to the seller/homeowner will be handled between those two parties.
110
The daily property tax rate is $1.23 and closing is August 31. Assuming the buyer owns the property on closing day, and the seller hasn’t made any payments, what will the seller oh at closing using the calendar year probation method? Round to the nearest whole dollar.
$151
$242
$298
$449
$298 – I guess this so figure out how I came up with it
111
Your seller client has an offer for $300,000. It’s a agreed upon commission is 5%, what is not to sell her before any other costs are taken into account?
$280,000
$285,000
$290,000
$295,000
$285,000
300,000×5% equals $15,000
Take $300,000 subtract $15,000 equals $285,000
112
A listing brokerage received a $25,000 check from a property sale, which represented the brokers 2.5% split. The total commission was 5%. How much did the property sell for?
$100,000
$10 million
$1 million
$2 million
$1 million
The brokerage received $25,000 we know that the split for them was 2.5 and altogether there was 5% commission, therefore we would double that commission if it was split in half to $50,000.
$50,000 ÷ 5% or 0.05 equals 1,000,000.
113
A licensee sells a property for $325,000. The total commission rate is 6%, which is split evenly with cooperating agent. What amount goes to the listing broker?
0%
$19,500
$4875
$9750
$9750
325,000 X 6% or 0.06 = 19,500÷$9750.
114
A buyer is purchasing a 1.5 million property in a city that imposes a transfer tax of $12 per $1000, in addition to the county transfer tax and $.55 per $500. What is the total transfer tax this property is subject to?
$19,650
In total, the property is subject to $13.10 per $1000. This is because there is a city rate of $12 per $1000 and a county rate of $1.10 per $1000 in total this property is subject to $19,650 and transfer taxes .
Take the $.55 per 500 and make it a $1.10 per $1000
15,000×13.10 = 196,500.
I still don’t understand
115
Potential gross income
Potential gross income is annual income that a property could bring in at least at full capacity. The most a property can make it fully rented, and income opportunities for fully realized.
116
Effective gross income
Look at the ideal income situation, but deduct for vacancies and credit loss. Subtract losses from vacancies in Credit losses, such as tenants do not pay their rent, and it becomes uncollectible, from potential gross income, then adding any miscellaneous income, such as parking fees, vending machines
117
Net operating income NOI
I income projected after deducting losses for vacancy, collection, loss, and operating expenses
investors are not taxed on net operating income, which reduces business debt, which is called debt service
I depending on the properties, depreciation allowance, depreciation can sometimes effectively cancel, net, taxable income, resulting in no taxes owed
118
Capitalization rate/cap rate
The return on investment that other investors in a given in Marketplace, are receiving for a similar property, expresses the income, a real estate investment produces as a percentage of its price
Example, when she worked with her investor, clients, Maggie regularly calculated cap rates for similar properties
119
Income received before expenses are deducted
Gross income
120
Annual income that a property could bring in if it were released at full capacity
Potential gross income
121
Income after losses from vacancies and credit losses are deducted
Effective gross income
122
A property has 100 units and 95% occupied. Total vacancy and collection lost equals 6%. What does the average rent per month have to be to achieve a potential gross income of $900,000 for the year
$700
$750
$800
$850
Fully occupied hundred units and does not doctor in any losses or vacancies.
Divide 900,000 by the number of units 100
9000
This is the total rent income needed to achieve the potential gross income
Divide this number by 12, the number of months in a year
9000 ÷12 = $750
123
Potential gross income is $900,000, we can calculate the effective gross income for the property. Remember, total vacancy, and collection loss equals 6%. Assume this property has no other income. What is the effective gross income
$900,000
$54,000
$846,000
Remember potential gross income is 900,000 and deductions or 6%
Multiply these numbers, then subtract the answer along with other income from 900,000 to reach effective gross income
$900,000 times 6% or 0.06 = $54,000 minus this from $$900,000 = $846,000
124
What do you get when you subtract operating expenses from effective gross income?
Potential gross income
Gross income
Net operating income
Net operating income
125
Formula for calculating basis
Sales price + acquisition cost + capital improvements = basis
126
Formula for straight line depreciation
Basis ÷recovery period = allowed annual tax deduction
127
What are two types of depreciation?
Economic depreciation, and tax depreciation
128
One example of economic depreciation is when the Astha is actually worth less because it’s deteriorating physically
True or false
True
129
Text appreciation is one investors take an annual business deduction by decreasing and often appreciating asset
True or false
True
130
Depreciation is limited to home. Owner occupied an investment properties.
True or false
False
131
The IRS requires investors to depreciate their investment properties
True or false
True
132
Text appreciation is cost recovery
True or false
True
133
The basis of an asset includes the sale, price, acquisition, cost, and any capital improvements
True or false
True
134
What is the name of the method that investors used to calculate their annual property deduction?
Economic depreciation
Depreciable basis
Straight line depreciation
Tax appreciation
Straight line depreciation
135
For income producing residential property, which straight line method would an investor used to calculate the properties annual depreciation allowance
Depreciable basis ÷25 years
Depreciable basis ÷27.5 years.
Depreciable basis ÷39 years
Depreciable basis ÷27.5 years.
136
For income producing commercial property, which straight line method would an investor used to calculate the properties annual depreciation allowance?
Depreciable basis ÷25 years
Depreciable basis ÷39 years
Depreciable basis ÷30.5 years.
Depreciable basis ÷40.5 years.
Depreciable basis ÷39 years
137
Capitalization rate to derive value
Capitalization is a process of using a properties income to calculate its value. Investors looking to determine approximate value of their income producing property’s to do so by calculating.
**Net operating income ÷capitalization rate = approximate value**
A lower cap rate translates into lower risk and higher property value. indicator not Appraisal. It can work in reverse as well for investors looking to buy property.
**Value(purchase price) x cap rate = net, operating income**
_200,000 x 0.07 equals $14,000, net operating income_
If instead, a cap rate, do you know the annual income in value you can determine the cap rate by dividing the income by value
**Net operating income ÷value = cap rate**
_$14,000 ÷ $200,000 = 0.07 or 7%._
138
Capitalization rate to derive to value
The factors in formulas are generally referred to as I (for income),R (for Rate, or cap rate), and V (for value)
Income - multiply cap by rate by value R x V =I
Value - divide income by rate I ÷R =V
Rate/cap rate - divide income by value I ÷V =R
Remember to multiply the resulting decimal by 100 to get a percentage
139
Which factors are in the capitalization formula?
Income, value, rate
140
Similar properties in the area of Jimmy’s $800,000 property are returning a rate of 9% . What could he anticipate his net annual income be?
7.2 million.
72,000
88,500
$72,000
Take $800,000 times 9% equals $72,000
141
A property valued at $950,000 is returning and the annual income of $115,000. What’s the cap rate for the investment?
12.1%
.121%
8.26%
Cap rate is income divided by value
115,000÷950,000 = 0.1210 multiplied by 100 = 12.1%.
142
Gross rent multiplier GRM
The GRM = price ÷ gross rent
I figure used as a multiplier of gross monthly rent as a property used to estimate property value for properties of 1 to 4 units
143
Gross income multiplier, GIM
GIM = sales price ÷effective gross income
I figure used as a multiplier of gross annual income of a property, used to estimate property value for properties of 5+ units
The GIM represents the ratio between the sales price and affective gross income
144
.
145
Calculating GRM
A duplex is selling for $550,000. Each unit Ken gross $2500 in monthly rent for the owner. What is the GRM
9.16 X.
15.25 X.
22X
110 X
It’s a duplex so you need to double 2500 and make it 5000
550,000÷5000 = 110 X
146
Calculating GIM
820 unit apartment building sold for $5 million. The property can grows $400,000 in annual gross income. What is the GIM
1.2x
12.5x
125 X
12.5.
5,000,000 ÷400,000 = 12.5 X.
147
If the GIM in an area is 8X Andy estimated annual rent is 24,000, what is the estimated property value
$192,000
240,000
$288,000
$192,000
24,000×8 equals $192,000
148
A comparable properties sold one month ago for $400,000. The property has a three car garage where as the subject property you’re preparing to list only has a two car garage. What should you do to determine the subject property market value
Adjust the comparable price down
149
Which one of the following statements about investors and tax depreciation is true
Depreciation is not limited to investment properties
Investors are not allowed to take a business deduction for annual depreciation
Investors can depreciate and appreciating asset
Most investors try to avoid depreciation
Investors can’t depreciate and appreciating asset
150
Do you know what properties effective gross income and it’s operating expenses. How would you calculate the net operating income?
Add income to tax deductions
Multiply annual return by .05 of the property value.
Multiply monthly income by 12
Subtract operating expenses from effective gross income
Subtract operating expenses from effective gross income
Net operating income is effective, gross income, minus operating expenses
151
Income received before expenses are deductible is the definition of———-
Effective gross income
Gross income
Net income
Texas
Gross income
152
What are comparable property has a feature that the subject property doesn’t have, what should the licensee preparing a CMA do?
Adjust the comparable price down
Adjust the comparable price up
Adjust the subject price down
Adjust the subject price up
Adjust the comparables price down
To determine the value of a subject property, start with the comparables value (selling price) and adjust from there. If the comparable has a feature of the subject property doesn’t have, the features value needs to be deducted.
153
Mia owns a small graphic shop and is meeting with her tax professional to receive the years receipts and other tax documents. Her tax advisor lets her know that she has an a appreciating asset, which makes Mia very happy which of the following is maze appreciating asset.
Her new 3-D printer
The digital printing press that she bought six months ago
The retail edition she put onto the building she already owned
The Vin she will use to show up for set ups
The retail edition she put onto the building she already owned
154
A three unit income producing property has a sales price of $600,000. Monthly gross rent is estimated at $6000. What’s the gross rent multiplier
100 X
$6000 divided by 6000 equals 100 X
155
In the capitalization formula, what does the I stand for?
Impact
Income
Interest
Investment
Income
