Real estate Math Flashcards
The SW 1/4 of the N 1/2 of Section 18 contains how many acres and how many square feet?
a. 80; 3,484,800.
b. 40; 1,742,400.
c. 80; 3,492,000.
d. 160; 6,984,000.
a — Determining the square footage of a portion of a section requires starting at the end of the description and working backward. A section contains 640 acres. Thus, the first step in this problem is:
640 acres / 2 = 320 acres (N 1/2 of a section)
The next step requires dividing the north 1/2 of a section by 4 as the question asks for 1/4 of the previous portion of the section.
320 acres / 4 = 80 acres (SW 1/4 of N 1/2 of a section)
Finally, multiply 80 acres by the square footage in an acre (43,560 sq. ft.).
43,560 sq. ft. x 80 acres = 3,484,800 sq. ft.
Solution: 80 acres or 3,484,800 sq. ft.
The NW 1/4 of the SE 1/4 of Section 21 sold for $4.00 per square foot. What was the sales price?
a. $1,742,400.
b. $6,969,600.
c. $13,939,200.
d. $3,484,800.
b — Here again, begin with the section (640 acres) and divide by 4 (the SE 1/4 of the section).
640 acres / 4 = 160 (SE 1/4 of the section)
Next, divide 160 by 4 (the SW 1/4).
160 acres / 4 = 40 acres (NW 1/4 of SE 1/4 of a section)
Multiply 40 acres by the square footage in an acre (43,560 sq. ft.).
43,560 sq. ft. x 40 = 1,742,400 sq. ft.
Finally, now that it is known how many square feet are in this parcel of land, multiply this total by the price per square foot.
1,742,400 sq. ft. x $4 = $6,969,600 - Solution: $6,969,600.
Remember, this four-step question is still only worth one point, just the same as any other question on the exam.
If the monthly rent on a particular duplex is $1,200 per month for each unit and the gross rent multiplier (GRM) is 12.5, what is its value?
a. $15,000.
b. $180,000.
c. $360,000.
d. $30,000.
c — The multiplier method for calculating a property’s value under the income approach has two steps when the multiplier is known, as is the case in this question.
Start by determining the total annual rents generated by an income-producing property.
$1,200 (rent per unit) x 2 (units) x 12 (months) = $28,800
Next, multiply the gross rents ($28,800) by the GRM given in the question (12.5).
$28,800 (total rent) x 12.5 (GRM) = $360,000
Solution: $360,000.
An apartment building produces an annual net operating income (NOI) of $24,000. A buyer seeks an annual rate of return of 12%. What price does the buyer pay for the property?
a. $200,000.
b. $288,000.
c. $240,000.
d. $500,000.
a — The capitalization method requires knowing the net operating income (NOI) and the appropriate cap rate. First, place the two numbers provided in the question into the cap rate formula.
$24,000 (NOI) = 12% (cap rate) x P (price)
Next, divide the NOI by the cap rate.
$24,000 / 0.12 = P
P = $200,000
Thus, the buyer is to pay no more than $200,000 to yield a 12% rate of return.
Solution: $200,000.
