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Real Estate Math Formulas
Excise Tax (Revenue Stamps) Rev'd Sales Price/500 = Excise Tax
Title Insurance Sales Price /1000 x 2 (OR Sales Price/500) Property Tax Tax Rate x Assessed Value/100 = Annual tax Pro-rated tax = Annual tax/360 = tax per day. Multiply by days being pro-rated 360 = Days in Banker's Year. Gain or Loss onPrincipal Residence Gain/Loss = Amount Realized - Adjusted Basis Amount Realized = Selling Price - Closing Costs to sell. Adjusted Basis = Orig. purchase price + closing costs tobuy + permanent capital improvements. Qualifying a Buyer - Min. Income needed
PITI/ 28%= minimum mo. income for Housing alone PITI / 36% = minumum mo. income for combined exp. Qualifying A buyerusing income ratio & PITI only:Mo. Income x 28% = Maximum PITI
PITI + Expenses: Mo Income x 36% = Maximum PITI + Expenses Max Loan Mo. Income x .36 = Max PITI recur. payment Max PITI recur- Tax/Ins/Recurring Exp. = PI PI = Factor x loan/ PI / Factor = Loan (in thousandths) Loan in thousandths x 1000 = Max Loan Qualifying a buyer using income & debt ratios.
Mo income x 28% (31℅ FHA) = max payment to qualify. Mo Income + combi expenses x 36% (43payment to qual.) ℅ FHA) = max VA ratio is only 41℅ of income. Profit & Loss Current Value / Original Price = Rate of Profit or loss or Current-Original=Amount gained or lost / Original= % ofloss or gain. NOTE: Original price is 100% basis. When theres a profit, the rate will be over 100%; when there's a loss, the rate isunder 100%.
Rate of 1.39 = 39% gain Rate of .90 = 10% loss Area of square or rectangle
Length x Width = Area
Area of Triangle Base x Height / 2 Cubic Feet Length x Width x Height
2 points = 2%, etc. PI (Monthly Principal &Interest Payment) = Factor x loan/
PITI (Principal, Interest,Tax & Insurance) = PI + Monthly Tax & Insurance payments.
Interest Paid over Life of a Loan
PI x 360 = Lifetime payment total; Lifetime payment total - original loan amount = Interest only over loan life.
months in 30 year
term
months in 15 year term 180
Annual Interest = Interest Rate x Loan Principal Monthly Interest = Interest Rate x Loan Principal / 12 months Principal-only Payment = PI - Monthly Interest PI = Factor x Loan/ Mo Int. = Int. Rate x Principal/ Lender's Yield: One Discount Point = 1/8% of 1% of Loan Amount i.e., 1/4% Interest Rate = 2 Points 8 Points = 1% of a an interest rate. Lender Qualification Ratios
28 ℅-36℅ conv. 31 ℅ - 43℅ FHA 41 ℅ VA Sales Comparison Approach to PropertyValuation
Select 3 Comps & compare features: When Subject is Superior, add to the comp price;
When Subject is Inferior, subtract from the comp's price. Cost Approach toValuation uses what Factors?
Simple (Straight-line) Method of Depreciation. Cost per sf of building; Economic Life Effective Life Lot Value Economic Life = # of years a bldg will have value considering depreciation. Effective Life = Age of a building based on its condition, not actual age. Cost Approach Valuation:
5 Stage Formula: 1 - Cost of Building: sf of bldg x cost per sf = Cost of Building 2 - Cost of Building / Economic Life = Annual Loss(Depreciation) 3 - Annual Loss x Effective Age = Total Depreciation Loss 4 - Building Cost - Total Depreciation = Depreciated Value of Bldg. 5 - Depreciated Value of Bldg. = Lot Price = Total CurrentValue
Market Abstract Method of Depreciation
Replacement cost of comps - their sales prices = Amount of Depreciation Gross Rent Multiplier (GRM)
= Sales price / Rent
of months it will take to recoup price paid.
Calculating Used in Sales Comparison to account for appreciation in
