N. Real Estate Math Calculations Flashcards
Ginny’s mountain lodge is 330 feet long by 100 feet wide. How many square feet is her property?
A. 33,000
B. 10,000
C. 3,300
D. 30,000
A. 33,000
330 × 100 = 33,000 square feet.
Alan and Kate want to build a 5,000-square-foot rancher on two acres of land they just bought. Once the house is built, how many acres of land will remain undeveloped?
A. 0.88 acres
B. 0.89 acres
C. 1.88 acres
D. 1.89 acres
D. 1.89 acres
There are two units of measurement here: acres and square feet. In order to perform this calculation, you have to convert one to the other so that both are expressed in the same unit of measurement. Remember that one acre is equal to 43,560 square feet, so if they bought two acres then you must multiply that number by two (43,560 × 2 = 87,120). If they are building a 5,000-square-foot house, then this amount must be subtracted from the total amount: 87,120 – 5,000 = 82,120 square feet. Now you have to convert that amount back to acreage. In order to do so, divide the amount in square feet by the square feet in one acre: 82,120 ÷ 43,560 = 1.8852, rounded to 1.89 acres.
The gross income multiplier for an area is 12X. If the estimated annual rent is $10,000, what’s the property’s estimated value?
A. $100,000
B. $10,000
C. $12,000
D. $120,000
D. $120,000
If the subject property’s gross market rent is $10,000 and the multiplier extracted from the local market is 12X, the estimated value of the subject is $120,000
Carol is performing a comparative market analysis (CMA), and is working with three comparable properties. How does she account for differences between the subject property and comparables?
A. If the subject property has a valuable feature lacking in the comparable property, she adds this value to the comparable property’s sales price.
B. If the comparable has a valuable feature lacking in the subject property, she adds this value to the subject property.
C. If the comparable has a valuable feature lacking in the subject property, she deducts this value from the subject property.
D. If the subject property has a valuable feature lacking in the comparable property, she subtracts this value from the comparable property’s sales price.
A. If the subject property has a valuable feature lacking in the comparable property, she adds this value to the comparable property’s sales price.
When performing a market analysis, the goal is to adjust the comparable properties to make them more similar to the subject property. We never adjust the price of the subject property, so options B and C are immediately eliminated. If the subject property lacks a valuable feature (like a pool) that the comparable has, you’d add the value to the comparable property’s price. This eliminates option D. Option A reflects the proper approach to performing a CMA.
The Walton family got a great deal on their new home. They bought it for $101,295, and it appraised at $187,000. Using an assessment ratio of 25%, what is the assessed value of their new home?
A. $ 21,246
B. $ 25,323
C. $ 46,750
D. $ 52,753
C. $ 46,750
The assessed value is based on the appraised value of the home. So while the amount their home appraised for was significantly higher than what they bought it for, they’ll only be taxed on 25% of it. In this case, $187,000 × .25 = $46,750.
Hal sold his client’s listing for $230,000, but it only appraised at $200,000. The buyers were able to bridge that gap by putting the extra $30,000 down. What will Hal’s 5% commission be?
A. $10,000
B. $11,500
C. $16,000
D. $13,500
B. $11,500
Commission is always calculated off of the sales price: sales price × commission rate = commission owed. So, remember to convert that 5% to a decimal by moving the decimal point over two places to the left (0.05), then multiply it by the sales price ($230,000). So, $230,000 × .05 = $11,500
Yasmin listed a house at a 6% commission rate, and it just sold for $463,500. Her brokerage and the buyer’s agent’s brokerage split the commission equally between them. Then Yasmin, who has a 60/40 commission split with her broker (Yasmin gets the higher split), took her check to the bank. How much did Yasmin earn from this transaction?
A. $5,562
B. $6,909
C. $8,343
D. $9,200
C. $8,343
You know the sale price of the property ($463,500) and the commission rate (6%), so multiply those two numbers to calculate the total commission amount: 463,500 × 0.06 = $27,810. Next, the total commission is split between the listing brokerage and the buyer’s agent’s brokerage. The scenario tells us that the brokerages have a 50/50 split, so you’ll divide the commission amount by two: $27,810 ÷ 2 = $13,905. This represents the amount that each brokerage receives. Of this amount, Yasmin’s commission is 60% while her broker gets 40%. Multiply $13,905 by 0.6. Yasmin’s commission for this transaction is $8,343.
Alistair bought a townhouse for $285,900. He got a 90% loan and the lender charged him three-and-a-half discount points. How much did Alistair pay in discount points?
A. $1,000.65
B. $9,005.85
C. $10,006.50
D. $9,585.00
B. $9,005.85
First calculate Alistair’s loan amount by multiplying the price he paid for the townhome by 90%. Don’t forget to move that decimal point over two places to the left to convert the percentage to a decimal for your calculation (285,900 × .90 = $257,310). Now that we have our loan amount of $257,310, to calculate the amount Alistair will pay in discount points, take that loan amount and multiply it by the discount points (3.5%, or 0.035). $257,310 × .035 = $9,005.85 (option B).
A buyer is purchasing a property for $400,000. His loan-to-value ratio is 80%. How much is the buyer financing?
A. $400,000
B. $360,000
C. $320,000
D. $80,000
C. $320,000
An 80% LTVR means the buyer is financing 80% of the purchase price and is putting the other 20% down. To calculate, take the purchase price of the property ($400,000) and multiply it by the percentage amount that he will be financing (80%, or 0.80): $400,000 × .80 = $320,000
A buyer with a 15-year, $250,000 loan at a 5.5% interest rate has a monthly mortgage payment of $2,042.71. Assuming he pays taxes and insurance separately, if $1,145.83 of his payment is interest, how much is applied to the loan’s principal?
A. $896.88
B. $ 916.67
C. $ 1,145.83
D. $ 2,042.71
A. $896.88
Monthly mortgage payments are typically made up of principal, interest, taxes, and insurance (PITI). Since we know that the taxes and insurance are being paid separately, we can deduce that this buyer’s mortgage payment is made up of only principal and interest. All we have to do is subtract the interest paid ($1,145.83) from the total monthly payment ($2,042.71) to determine the amount remaining, paid toward principal. $2,042.71 – $1,145.83 = $896.88
Helen is purchasing a home for $150,000 and provides a $2,500 earnest money check to the seller. Her closing costs and down payment total $4,800. How much should Helen bring to the closing?
A. $2,300
B. $4,800
C. $7,300
D. $2,700
A. $2,300
So, you take the total amount of $4,800 then subtract the $2,500 she’s already paid in earnest money to determine what she still owes: $4,800 – $2,500 = $2,300
A seller wants to net $10,000 after the broker’s commission of 6% and a loan balance of $250,000 are paid. For how much does the property need to sell?
A. $650,000
B. $265,957
C. $276,596
D. $250,000
C. $276,596
A seller owns 100% of the property. If the seller agrees to pay a broker 6%, that leaves them with a total percentage of 94% (100% – 6%). You’d want to then convert 94% to a decimal, .94. Since the seller still owes $250,000 on the loan but wants to net $10,000 more than what the bank will be paid, add the $10,000 to the remaining loan balance ($250,000 + $10,000 = $260,000). Finally, divide that total amount by the percentage the seller will be left with after the broker’s commission (94%). $260,000 ÷ .94 = $276,596
Shelly, an investor, is thinking about buying a $500,000 house to use as rental property. She has $100,000 saved up for a down payment and will mortgage the remaining $400,000. The annual cash flow is projected to be $24,000. What’s the potential rate of return?
A. 2.4%
B. 6%
C. 24%
D. 25%
C. 24%
The formula to use here is annual cash flow ÷ initial cash investment = rate of return. Remember to consider Shelly’s cash investment, NOT the sale price or amount that she financed. In this case, Shelly’s initial investment is her $100,000 down payment. When you divide the annual cash flow ($24,000) by the cash investment, the resulting amount is 0.24. Multiply by 100 to convert to a percentage, and you get 24%.
Over how many years is a residential income-producing property depreciated?
A. 29 years
B. 27.5 years
C. 39 years
D. 40 years
B. 27.5 years
Depreciation is a tax deduction that may be taken on an investment property over a specified period of time. There’s no trick to it; the depreciation timeline is just one of those things you’ll need to memorize for your exam. An investor who owns a residential income-producing property may depreciate that property over 27.5 years. Commercial property depreciates over 39 years. For this situation, option B is where it’s at.
The owner of a duplex charges $2,000 per month for each unit. Over the last 12 months, one half of the property was vacant for six months. What was the owner’s effective gross income for this 12-month period?
A. $48,000
B. $3,000
C. $36,000
D. $24,000
C. $36,000
A duplex has two units, so one way to approach this question is to first determine what the per-unit gross income is for one of the two units. At $2,000 per month, a single unit rents for $24,000 per year. The other unit (the “one half of the property”) was only rented out for six months and vacant for six months, so the owner only collected half of the typical annual rent, or $12,000. The $24,000 income from the first unit and the $12,000 from the second unit total $36,000.
