Math Flashcards
Commission Formula
Commission = (house selling price) x (commission percentage)
Simple Interest Formula
Interest = (principal amount) x (rate of interest) (time)
28/36 Rule or “The Mortgage Rule of Thumb.” Formula
Housing costs to qualify for most loans= (gross monthly or annual income) x (.28)
Property Tax Rate
Property Tax Rate = (assessed value) x (mill rate)
Assessed Value
Assessed Value = (assessment rate) x (market value)
1 mill
1 mill = equal to 1/1,000th of a dollar or $1 in property tax.
1 Acre in square feet
1 Acre = 43560 square feet
1 Mile in linear feet
1 Mile = 5,280 linear feet
1 square yard in square feet
1 square yard = 9 square feet
1 cubic yard in cubic feet
1 cubic yard = 27 cubic feet
1 square mile in acres & sections
1 square mile = 640 acres = 1 section
1 acre in square feet
1 acre = 43,560 square feet
Area of triangle
1/2 base X height
Area of trapezoid
(average of both base lengths) X height
Annual gross rental income
(monthly rental income) x (12)
Gross Rent multiplier equations (GRM)
Sales price = monthly rental income X GRM
Monthly rental income = sales price / GRM
GRM = sales price / monthly rental income
Gross Income Multiplier equations (GIM)
GIM = sales price / annual income
Sales price = annual income X GIM
Annual income = Sales price / GIM
Coast approach formula
Value = Land Value + (improvements + capital additions - depreciation)
Depreciation
Annual depreciation = beginning depreciable basis / depreciation term (number of years)
Depreciable basis
Initial property value + any capital improvements - land value
Income capitalization approach
Value = annual net operating income / capitalization rate
Capitalization rate = annual net operating income / value
Annual net operating income = value X capitalization rate
Net operating income (NOI)
NOI = potential gross income - vacancy loss + other income - operating expenses
Interest rate equation
interest rate = annual payment / loan amount
Interest only loan
Total interest - loan amount X rate X term in years
Fully amortized loan
Total interest = (monthly PI payment X 12 X term) - loan amount
Amortization calculation
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
Loan constants
Monthly Payment = (loan amount / 1000) X loan constant
Loan amount = (Monthly payment / loan constant) X 1000
Loan constant = (Monthly payment / loan amount) X 1000
Loan to value ratio (LTV)
LTV ratio = loan / Price (value)
Loan = LTV ratio X price (value)
Price (value) = Loan / LTV ratio
Income ratio qualification
Debt ratio = (housing expenses + other debt payment) / monthly gross income
Housing expenses = (monthly gross income X debt ratio) - other debt payments
Appreciation
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
Rate of return
Rate = income / value
Value = income / rate
income = value X rate
Equity
Equity = current market value - current loan balance
Net operating income (NOI)
**The gross income minus all operating expenses
NOI = potential rent - vacancy loss + other income - operating expenses
Cash flow
**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
Capital gains and adjusted basis
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
Tax liability
Tax liability = (NOI + reserves - interest expense - depreciation) X tax bracket
Return on investment
**The ratio between the net profit and the cost of investment
ROI = NOI / Price
Return on equity
**The ratio between the cash flow and equity in a property
ROE = Cash flow / equity
Percentage lease rent
**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
Rent escalation
**A way to determine the dollar amount of a rent increase
New rent = current rent X (100% + escalation rate)
Mill rates
**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
Tax base
**Total tax assessed value of all real property in a particular jurisdiction
Tax base = assessed valuations - exemptions
Tax rate, base, and requirement
Tax rate = Tax requirement / tax base
Tax base = tax requirement / tax rate
Tax requirement = Tax base X rate
Commission splits
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
Seller’s Net
**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
Minimum contract price
**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
Percentage of listing price calculation
**It’s a ratio of the offer to the listing price
Percentage of listing price = offer / listing price
Earnest money deposit calculation
**Used to determine an appropriate amount of earnest money to include with an offer
Deposit = offering price X required or market-accepted percentage
Closing cost prorations
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)
365 day method of prorations
Daily amount = annual amount / 365 OR monthly amount / length of month
