A building generates $87,000 NOI after expenses and has a debt payment of $33,000. What is its cash flow?
$54,000 ****Debt payments are deducted from cash flow, but not from Net Operating Income!!!!
A home appreciated 8.2% one year, then 2.4% the next year, then 7.2% the third year. If the annual increase in value was compounded, what was the average annual rate of appreciation over the 3-year period?
(1.082)
(1.024)
(1.072) = (1.18774 -1) = .18774 / 3 years = .06258 per year
An apartment complex generates $778,000 in effective rental income and $7,000 in other income. The same complex has $378,000 in operating expenses and $12,000 as reserves. What is the net operating income of the complex?
$778,000 + $7,000 - $378,000 - $12,000 = $395,000
A store generates $50,000 / month. The lease calls for 1.5% percentage rent. Monthly rent amount?
Monthly percentage rent = Sales times % Sales charged
($50,000 x .015) = $750 / month
An apartment's rent is scheduled to increase by 6%. If the current rent is $450, the new rent is:
New rent = current rent x (100% + escalation rate)
$450 x (100% + 6%) = $450 x 1.06 = $477
A tax rate on a house with a $200,000 taxable value is 7 mills per thousand dollars of assessed valuation. What is the tax?
Tax = Taxable value � 1,000 x Mill rate
Tax = ($200,000 � 1,000) x 7 mills = $1,400
A town has a total assessed valuation of $20,000,000 and exemptions of $4,000,000. What is the tax base?
Tax base = Assessed valuations - Exemptions
$20,000,000 - 4,000,000 = $16,000,000
A town has a tax base of $160,000,000 and a budget of $8,000,000. What is the tax rate?
Tax rate = tax requirement � tax base
Tax rate = ($8,000,000 � 160,000,000 ) = .05, or 5%, or 50 mills
A $300,000 property sells at a 7% commission with a 50-50 co-brokerage split and a 60% agent split with her broker.
Total commission = Sale price x Commission rate
Total commission = $300,000 x .07 = $21,000
A $300,000 property sells at a 7% commission with a 50-50 co-brokerage split and a 60% agent split with her broker.
Co-brokerage split = Total commission x Co-brokerage percent
Co-brokerage splits = $300,000 x .07 x .50 = $10,500
A $300,000 property sells at a 7% commission with a 50-50 co-brokerage split and a 60% agent split with her broker.
Agent split = Co-brokerage split x Agent percent
Agent split = $10,500 x .60 = $6,300
A $300,000 property sells at a 7% commission with a 50-50 co-brokerage split and a 60% agent split with her broker.
Broker split = Co-brokerage split - Agent split
Agent's broker's split = $10,500 - 6,300 = $4,200
A home sells for $260,000 and has a loan balance of $200,000 at closing. The commission is 7% and other closing costs are $2,000. What is the seller's net?
Multiply the sales price by the commission rate: 260,000 x .07 = $18,200
Subtract as needed: $260,000 sales price - $18,200 commission - $2,000 other closing costs - $200,000 loan balance = $39,800 seller's net
is the lowest amount that the seller can list the property for and still cover all of his expenses (commission, closing costs and existing mortgage) and make the desired profit
The Minimum Listing Price
A home seller wants to net $50,000. The commission is 7%, the loan payoff is $150,000, and closing costs are $4,000. What must the minimum listing price be?
1. Add up the desired seller's net, the loan payoff and the closing cost: $50,000 + 150,000 + $4,000 = $204,000 seller's gross profit
2. Since the seller has agreed to a 7% sales commission, that means he will get to keep 93%, which is 0.93 as a decimal.
The sellers, Mr. and Mrs. Hernandez, listed their property for $112,000 and agreed to an exclusive right to sell listing agreement at a 4% commission to be paid to Lucky Nines Estate Company at closing. The sellers sold the property themselves during the
$4,240
Percentage of Listing Price Calculation
A property listed for $150,000 receives an offer for $120,000. The offer's percentage of listing price is:
$120,000 � $150,000 = 80%
Earnest Money Deposit Calculation
A seller requires a 2% deposit on a property listed for $320,000. The required deposit (assuming a full price offer) is:
$320,000 x 2% = $6,400
When using this method for prorations, each month has 30 days not actual days within that month.
30-Day, Statutory Year, or 360-Day Method.
365-Day Method or Calendar Year prorations use
actually days in each month for prorations. For example, December has 31 days, and February has 28 days.
An annual tax bill is $1,800. Closing is on April 10. What is the seller's share of the taxes which are paid in arrears using 30-Day, Statutory Year, or 360-Day Method?
Monthly amount = ($1,800 � 12) = $150; no. of months = 3
Daily amount = ($150 � 30) = $5.00; no. of days = 10
Proration = ($150 x 3) + ($5 x 10) = ($450 + 50) = $500 seller's share
An annual tax bill is $1,800. Closing is on April 10. What is the seller's share of the taxes which are paid in arrears using 365-Day Method?
Daily amount = ($1,800 � 365) = $4.93
Jan 1 thru April 10 = (31 + 28 + 31 + 10) days, or 100 days
Proration = $4.93 x 100 days = $493 seller's share
Income Received in Advance (Rent)
Seller receives $1,000 rent. The month is � over.
Buyer's share is ($1,000 x 25%) = $250
Credit buyer / debit seller $250.
Expenses paid in Arrears (Tax)
Buyer will pay $1,000 taxes. The year is � over.
Buyer's share is ($1,000 x 25%) = $250
Credit buyer / debit seller $750
An owner insures a home for $100,000. Replacement cost is $150,000. A co-insurance clause requires coverage of 80% of replacement cost to avoid penalty. Fire destroys the house. What can the owner recover from the insurer?
Claim recovery = $150,000 x (67% cost covered � 80% required) = $125,625
Triangle Formula =
Base x Height � 2
Sq ft in an Acre?
43,560
If the comparable is _________________ to the subject, subtract value from the comparable
superior
If the comparable is inferior to the subject, ____________ to the comparable.
add value
#NAME?
Sales price
Sales price
--------------------------- = ____________________________
Gross rent multiplier
Monthly rental income
Sales price
---------------------------- =
Monthly rental income
Gross rent multiplier (GRM)
Sales price
-------------------- =
Annual income
Gross income multiplier (GIM)
Annual income X GIM = _____________________
Sales price
Value = Land value + (Improvements + Capital additions - Depreciation)
Cost Approach Formula
(Initial property value + Any Capital Improvements - Land Value) = ____________________________________
Depreciable Basis
Beginning Depreciable Basis � Depreciation Term (number of years) = ______________________________________
Annual depreciation
Annual Net Operating Income � Capitalization Rate (Cap Rate) = _______________________
Value
Annual Net Operating Income � Value = ________________________
Capitalization Rate (Cap Rate)
Value x Capitalization Rate (Cap Rate) =
Annual Net Operating Income
Potential Gross Rent - Vacancy loss + Other income - Operating expenses = _______________________________
Net Operating Income (NOI, Net Income)
Operating Expenses do not include ______________________
mortgage payments!
Loan � Price (value)
LTV Ratio
Monthly Principal & Interest (PI) payment = _________________________
Income ratio x Monthly gross income
(monthly gross income X Debt ratio) - other debt payments
Housing expense =
Total appreciation rate =total appreciation � original price
Total appreciation rate =
Avg appreciation rate= total appreciation rate � # of years
Avg annual appreciation rate=
Appreciated value = Beginning value x (1+ annual rate) x (1+ annual rate) ...... for the number of years in question
Appreciated value =
Rate = income �_____________
value
Value =____________ � rate
income
Net operating income = value X __________
Rate
Rate = Income (NOI) � _________________
Value (Price)
A home that was purchased for $150,000 with a $100,000 loan is now worth $300,000. The current loan balance is $80,000. What is the homeowner's equity?
Equity = Current market value - Current loan balance(s)
Equity = $300,000 value - $80,000 debt = $220,000
A building generates $100,000 NOI after expenses and has a debt payment of $40,000. What is its cash flow?
Cash flow = (Net Operating Income - Debt service) where debt service is PI payment
Cash flow = $100,000 - 40,000 = $60,000
Amount realized - Adjusted basis = _______________________________
-if Amount realized = Sale price - Selling costs
Capital Gain
Beginning basis + Capital improvements - Total Depreciation = _________________________________
Adjusted Basis
Initial Property value + Capital Improvements - Land Value = ________________________________
Depreciable basis
An apartment building was purchased for $500,000, with the land value estimated to be $100,000. The owner added a $100,000 parking lot. The property was depreciated on a 40-year schedule (for present purposes!). Three years later the property sold for $70
depreciable basis = $500,000 purchase price + 100,000 parking lot - 100,000 land = $500,000
total depreciation = ($500,000 � 40 years) x 3 years = $37,500
adjusted basis = $500,000 purchase price + 100,000 parking lot - 37,500 total depreciation = $562,50
An office building has NOI of $200,000, an annual reserve expense of $20,000, interest expense of $130,000 and annual depreciation of $50,000. Assuming a 28% tax bracket, what is its income tax liability?
Tax liability = (NOI + Reserves - Interest expense
Tax liability = ($200,000 + 20,000 - 130,000 - 50,000) x 28% = $11,200
An investment property generates a cash flow of $100,000 and appraises for $1,500,000. What is the owner's return on investment?
ROI = NOI � Price
ROI = $100,000 � 1,500,000 = 6.67%
An investment property generates a cash flow of $100,000. The owner has $500,000 equity in the property. What is the owner's return on equity?
ROE (return on equity) = cash flow � equity
ROE= $100,000 � 500,000 = 20%
A principal residence is bought for $180,000. A new porch is added, costing $7,000. Five years later the home sells for $220,000, and the closing costs $18,000. What is the homeowner's capital gain?
Gain = amount realized ($220,000 - 18,000) - adjusted basis ($180,000 + $7,000) = ($15,000).
An investor sold a property for $3 million and incurred $300,000 in selling costs. He originally paid $2.4 million 3 years ago and has depreciation expense totaling $150,000. What was his capital gain?
Capital gain = (amount realized - adjusted basis). Here, the owner realized $2,700,000. The adjusted basis is 2,400,000 - 150,000, or 2,250,000. The gain is therefore 450,000.
A property listed for $650,000 receives an offer for $610,000. This offer's percentage of the listing price is what?
$610,000 � $650,000 = 93.8%
A seller requires a 2.5% deposit on a property listed for $400,000. The required deposit (assuming a full price offer) is what?
$400,000 x 2.5% = $10,000
An annual tax bill is $2,400. Closing is on February 14th and the day of closing belongs to the seller. What is the seller's share of the taxes using the 360-day method?
Monthly amount = ($2,400 � 12) = $200; # of months = 1
Daily amount = ($200 � 30) = $6.67; no. of days = 14
Proration = ($200 x 1) + ($6.67 x 14) = ($200 + 93.38) = $293.38
seller's share; debit seller that amount
A seller receives $1,000 rent in advance on her property that she is selling. The closing occurs on the 10th of the month. Using the 360-day method, how is this proration handled, assuming the seller owns the day of closing?
Seller's share is ($1,000 / 30 x 10) = $333; buyer's share is $666.
Credit buyer / debit seller $666.
An owner insures a home for $200,000. Replacement cost is $300,000. A co-insurance clause requires coverage of 80% of replacement cost to avoid penalty. Fire destroys the house. What can the owner recover from the insurer?
Claim recovery = $300,000 x (67% cost covered � 80% required) = $251,250
Seller David requires a 4% deposit on all offers. Buyer Jack wants to offer $115,000 for the property. The property was appraised at $122,000. What must the earnest money deposit be if Jack presents his current offer?
$4,600
Debra wants to net $100,000 on her house. Her closing costs will be 15,000 plus a 6% commission. She owes $310,000 on her loan. What should the sale price be (to the nearest $100)?
Instructor emailed for correct formula
An apartment building has $105,000 net income and sold for $1,450,000. What was the rate of return?
7.2%
A house sells for $237,000. What would Jane's commission rate be as a percent if she received a check for $11,400?
4.8%
Jerry recently obtained an 65% loan on his $295,000 home, and he had to pay $4,300 for points. How many points did he pay?
2.2 points
If an investor wants to combine a 5/8 acre parcel with a 3.9 acre parcel, how big will the parcel be, expressed as a decimal?
4.525 acres
A $150,000 loan has monthly interest-only payments of $1,000. Its annual interest rate is
8%
8 of 15 - A homeowner receives a tax bill that includes an amount for the school district, taxed at $9.00 per $1,000, and the fire protection district, taxed at $3.00 per $1,000. How much does the taxpayer have to pay for these two items if the property's
$4,032
A shopping mall grosses $625,000 / month. If the market value of this property is $52,000,000, what is its gross income multiplier (GIM)?
6.9
Christine has monthly loan payments of $1,857. Her loan is for $300,000 @ 6.3% interest. How much of her first payment goes towards interest?
$1,575
If the monthly rent of a property is $4,000, and the gross rent multiplier (GRM) is 91, what is the value of the property?
$364,000
Seller Trevor receives an offer of $181,000 on a property he listed at $193,000. The property has been appraised at $198,000. How much is the offer as a percent of the listing price?
93.8%
A home costing $540,000 is worth $588,000 two years later. What is the one-year appreciation rate?
*Calculated from original value
4.4%
Appreciation = current value - original price. Annual appreciation rate = (appreciation / price) / number of years, or $588,000 - $540,000 = $48,000 / $540,000 = 0.088 rate / 2 years = 0.044, or 4.4%.
The subject has $8,000 pool and a $2,000 chimney but no porch. A comparable that sold for $199,000 has a $3,000 porch but no pool or chimney. Assuming all else is equal, what is the adjusted value of the comparable?
A. $206,000
B. $186,000
C. $189,000
D. $192,000
If a borrower had an interest rate of 5 1/4 percent and refinanced, lowering the interest rate by 3/8 percent, what is the amount of interest after refinancing?
4 7/8 percent
Sean, age 37, sold the home he purchased three years ago and now rents an apartment. He had originally purchased his home for $86,500 and sold it for $115,300. In computing his income tax, Paul would pay taxes on how much?
$0 - Assuming Paul was single, he would only pay taxes on any profits over $250,000. Since his profit was only $28,800, he falls below the $250,000 minimum for singles. The profit minimum for married couples is $500,000.
A fine jewelry store leased a space at the mall with a base rent of $1,800 a month, plus 4% of all sales over $200,000. If the gross sales were $325,000, what was the total amount of rent paid by Heinz Fine Jewelry at the end of the year?
$26,600
A rented office space has a monthly income of $3,800. A suitable gross income multiplier derived from market data is 11.1. What would the estimated value be? Round to the nearest $1,000.
$506,000
Violet has a FHA loan for $90,000. The lender is requiring a 1% discount point to the lower the interest rate. What amount is the lender charging for the discount point?
$900.00
A property was listed at $200,000. The buyers made an offer of 90% of the list price which was accepted by the sellers. The home appraised for $185,000 and the buyers were obtained an 85% loan for 30 years at 5%. What is the monthly interest payment?
$637.50
If a hotel has an annual net operating income of $812,000 at a 9.35% cap rate, what is its current value (to the nearest thousand)?
$8,684,000
A building generates $103,000 in effective rental income and $900 in vending machine income. The same complex has $40,700 in operating expenses and $36,000 in debt service payments. What is the pre-tax cash flow of the complex?
$27,200
A home sells for $150,000 and has a mortgage loan balance of $100,000 at closing. If the commission is 5% and other closing costs are $6,000, what is the seller's net?
$36,500
A tax rate on a building with a $530,000 taxable value is 4.5 mills per thousand dollars of assessed valuation. What is the annual tax liability?
$2,385
Stacey owns a lot that has 180 feet of front footage and contains 36,000 square feet. He purchases two identically-sized lots adjacent to each side of his lot. These side lots are each 200 feet deep and contain 19,000 square feet. What is the total front
370
If a borrower's monthly interest payment on an interest-only loan at an annual interest rate of 7.3% is $877, how much was the loan amount (rounded to the nearest hundred)?
$144,200
A sale transaction closes on April 15th. The day of closing belongs to the seller. Real estate taxes for the year, not yet billed, are expected to be $2,110. According to the 365-day method, what is the seller's share of the tax bill?
$607
A house is sold for $105,500 and the commission rate is 6 percent. If the commission is split 60/40 between the selling broker and the listing broker, respectively, and each broker splits his share of the commission evenly with his salesperson, how much w
$2,532
Assuming the FHA qualifies borrowers based on a 31% debt ratio, if a borrower's monthly gross income is $4,400, what monthly payment for housing expenses can this person afford based on this ratio?
$1,364
A lender determines that a homebuyer can afford to borrow $220,000 on a mortgage loan. The lender requires an 85% loan-to-value ratio. How much can the borrower pay for a property and still qualify for this loan amount (to the nearest $1,000)?
$259,000
How many acres are there in the N � of the NE � and the NE � of the SE � of a section?
120 acres..........There are two parcels in this question. N � of the NE � is 2 x 4 = 8; 640 � 4 = 80 acres; NE � of the SE � is 4 x 4 = 16; 640 � 16 = 40 acres; 80 acres + 40 acres = 120 acres
If a house sold for $40,000 and the buyer obtained an FHA-insured mortgage loan for $38,600, how much money would be paid in discount points if the lender charged four points?
$1,544
Two parcels of land priced at $1,200 per acre were purchased. One parcel was 15 acres in size and the other was 1 mile square in size. How much did these two parcels cost together?
$786,000
A 198-foot x 330-foot lot sold for $30,000. What was the price per acre?
$20,000
A strip mall generates $215,000 in effective rental income and $3,000 in other income. The same mall has $102,000 in operating expenses and $15,000 as reserves. What is the net operating income of the strip mall?
$101,000
A borrower obtains a 30-year $210,000 amortized loan at a 6% interest rate. If his monthly payment is $1199.10, how much is applied to the principal balance in the first month?
$149.10
Amy agreed to a contract price of $100,000 for a home and secured a mortgage loan for $80,000. If the appraised value is $110,000, what is the loan to value ratio?
80%
If a lot contains 48,000 square feet and is 240' wide, how deep is the lot?
200'
Shelly bought a house five years ago for $150,000 and obtained an 80% loan. Now the home is worth $140,000 and her loan balance has been reduced by $12,000. What is Shelly's current equity?
$32,000
A buyer secured a $125,000 loan at 4.5% interest rate. If the buyer bought three discount points, what would the yield be to the lender?
4.125%.........While one discount point costs 1% of the loan, one discount point only reduces the interest rate by 1/8th of a point or 0.125 as a decimal. So, if a buyer purchased three points he only reduced the interest rate to 4.125%. (3 x 0.125 = 0.37
If a square-shaped lot measures 125' on one side, what is the square footage of the lot?
15,625 square feet
What is the number one rule of adjusting properties when using the sales comparison approach to value?
Never adjust the subject property
The current value of a property is $60,000. For real estate tax purposes, the property is assessed at 30 percent of its current value, with an equalization factor of 1.25 applied to the assessed value. If the tax rate is $4 per $100 of assessed valuation,
$900
What is the volume of a 90' x 20' x 12' house?
21,600 cubic feet
An FHA-insured loan in the amount of $57,500 at a 6 �% interest rate for 30 years was closed on March 17. The first monthly payment is not due until May 1. If the interest is paid monthly in arrears, how much pre-paid interest does the buyer owe at closin
$145.32
If an corporate building has nine office suites that rents for $14,800 per month each, but suffers from a 14% vacancy rate and annual expenses of $21,100, what is the NOI of the building (round to the nearest $100)?
$112,800.........(.86(9x14800))-(21100/12) = $112,793. Rounded to nearest hundred would be $112,800.
32 of 50 - Assuming that the listing broker and the seller broker in a transaction split their commission equally, what was the sales price of the property if the commission rate was 6 � percent the listing broker received $5,187?
$159,600
Six years ago a commercial property owner paid $490,000 for her complex which included 10 acres of land valued at $100,000. Using a 40-year straight-line depreciation method, what would be the current value of the apartment complex?
$431,500
$490,000 - $100,000 = $390,000; $390,000 � 39 = $10,000, $10,000 x 6 = $60,000; $490,000 - $60,000 = $430,000$490,000 - $100,000 (land does not depreciate) = $390,000/40 years = $9,750 per year depreciation. $9,750 X 6 years age = $58,500 accumul
If a buyer purchases 25% of a lot in the spring and then purchases 50% more later in the fall, what percentage of the lot is still available for purchase?
25%
If one discount point costs the borrower 1% of the loan amount, and increases the lender's yield by 1/8th of one percent, how many discount points must be purchased to lower the interest rate by 1%?
8
A five-sided lot has the following dimensions: side A = 44', side B = 67', side C = 91', side D = 18', and side E = 55'. What is the perimeter of the lot?
275 feet
Agent Daisy agrees to a 5% commission to list a home at $330,000. If Daisy receives 55% of her broker's commission and does not bring the buyer, how much does Daisy's broker receive from the deal?
$3,712.50
A seller wants to net $55,614 from the sale of her house after paying a 7% commission. Her minimum sales price will have to be?
$59,800
100% - 7% = 93% going to the seller; $55,614 � 0.93 = $59,800
A home seller wants to net $15,000. If he has agreed to pay a 5% commission, the loan payoff is $94,000 and closing costs are $16,000, what must the minimum listing price be? Round to the nearest $100.
$131,600
A property currently valued at $450,000 is expected to appreciate 8% each year for the next 3 years. What will be its appreciated value at the end of this period?
$566,870
An apartment building that sold for $780,000 had a monthly gross income of $8,000. What is its monthly gross rent multiplier?
97.5
A sale transaction on rental property closes on December 10th. The landlord received the December rent of $4,400 on December 1. Assuming the closing day is the seller's, and that the 360-day method is used for prorating, how much will the seller owe the b
$2,933
Ralph is buying Terry's house. The buyer's loan amount is $105,580. If the buyer has agreed to pay 3 points at closing, how much will he pay for the points?
$3,167
A homeowner bought a house one year ago for $250,000. Since then, the homeowner has spent $4,000 to pave the driveway and has added a screen porch at a cost of $3,000. Total depreciation has been $6,000. What is the homeowner's adjusted basis?
$251,000
Land sells for $9,000 an acre. What will 750,000 SF of land sell for? Round to the nearest thousand.
$155,000
If the roof a property cost $14,000 and its economic life is 18 years, what would its value be after four years using a straight-line method of depreciation?
$10,889
A property is being appraised using the income capitalization approach. Annually, it has an estimated gross income of $48,000, vacancy and credit losses of $3,600, and operating expenses of $15,000. Using a capitalization rate of 8%, what is the property'
$368,000
The annual property taxes of $1,700 were paid in arrears by the buyer. If the closing took place on June 4th and the seller paid through the day of closing, how did this appear on the settlement sheet if the 360-day method is used?
$727 DS, CB
_______________________________________________, the heated and cooled square footage of a structure that is measured using the outside dimensions.
Gross Living Area, or GLA
The ___________________________ is the boundary line that delineates the setback area.
setback line
On a residential lot that measures 70 feet by 100 feet, the side-yard building setbacks are 10 feet, the front-yard setback is 25 feet, and the rear-yard setback is 20 feet. What would the maximum possible area for a one-story structure be for this lot?
Subtract the front yard and back yard setbacks from the depth: 100' - 25' - 20' = 55' new depth
Subtract the side yard setbacks from the width: 70' - 10' - 10' = 50' new width
Multiply new depth by new width: 55' depth x 50' width = 2,750 SF maximum possi
A ____________________ is a square tract of land used in the Rectangular/Government Survey method.
section
A section: Is________ wide and ________ deep.
Contains________ Acres
1 mile / 640
How many acres are there in the S � of the SE � of the SW � of section 24, township 32 north, range 18 east?
20
Volume = ____________________________________
Height (or Depth) x Width x Length
If a homeowner wishes to fill in an old, outdated swimming pool that measures 20' in length, 10' in width and is 6' in depth with dirt, how much dirt will he need to buy in cubic feet?
6' x 10' x 20' = 1,200 Cu/Ft
The subject has a $10,000 pool and no porch. A comparable that sold for $250,000 has a porch ($5,000), an extra bathroom ($6,000), and no pool.
Adjustments to comp: $250,000 (+10,000 - 5,000 - 6,000) = $249,000 indicated value of subject
What is the value of a commercial property with an annual income of $33,600 and a GIM of 9.3?
$33,600 income x 9.3 GIM = $312,480
What is the GIM of a commercial property with annual income of $33,600 and a value of $312,480?
$312,480 price � $33,600 = 9.3 GIM
Cost Approach Formula = _____________________________-
Value = Land value + (Improvements + Capital additions - Depreciation)
Land value = $50,000; home replacement cost = $150,000; new garage added @ $30,000; total depreciation = $10,000. Value = _______________________________
Value = $50,000 + (150,000 + 30,000 - 10,000) = $220,000
Property value = $500,000; land value = $110,000; depreciation term = 39 years. What is the annual depreciation?
Step 1: ($500,000 - 110,000) = $390,000 depreciable basis
Step 2: ($390,000 � 39 years) = $10,000 annual depreciation
Income Capitalization Formula
Value = ____________________________
Annual NOI / Cap Rate
Income Capitalization Formula
Annual NOI = _________________________
Value X Cap Rate
Income Capitalization Formula
Cap Rate = __________________________
Annual NOI / Value
Points are fees charged by lenders to either lower an interest or to originate the loan. Each point charged is __________________ of the loan amount.
1 percent
a lender could charge a loan origination fee a.k.a. _______________ to originate the loan
(point)
a ______________________________ is charged up front to lower a borrower's interest rate which in some cases helps the borrower qualify for the loan.
discount point
A lender is charging 1% loan origination fee and 1% discount point to the borrower. The loan amount is $150,000. How many points is the lender charging?
Loan origination point: 1%
Discount point: 1%
Total: 2%
Loan amount: $150,000
Calculations: $150,000 x .02= $3,000.00 total points charged
formula for Points paid = _____________________
Fee / Loan
Formula for fee paid on points = ____________________
loan X points (as a decimal)
Formula for loan amount when given points and fee = __________________
Fee paid / Points (as decimal)
A borrower has a $100,000 interest-only loan @ 6% interest. What are the annual and monthly interest payments?
Annual interest payment = $100,000 x .06 = $6,000
Monthly interest payment = $6,000 � 12 = $500
A borrower has a $500 monthly payment on a 6% interest-only loan. What is the loan principal?
First, multiply $500 by 12 to get the annual amount of principal, $500 x 12 = $6,000 annual interest. Next, divide: $6,000 � 0.06 = $100,000 loan principal.
A borrower has a $500 monthly payment on a $100,000 interest-only loan. What is the loan rate?
First, multiply $500 by 12 to get the annual amount of principal, $500 x 12 = $6,000 annual interest. Next, divide the annual interest rate by the loan, $6,000 � 100,000 = 0.06, and the loan rate is 6%
A borrower can get a $265,600 loan on a $332,000 home. What is her LTV ratio?
LTV Ratio = $265,600 � 332,000 = 80%
A borrower can get an 80% loan on a $332,000 home. What is the loan amount?
Loan = $332,000 x .80 = $265,600
A borrower obtained an 80% loan for $265,600. What was the price of the home?
Price (value) = $265,600 � .80 = $332,000
A lender uses a 28% income ratio for the PI payment. A borrower grosses $30,000 per year. What monthly PI payment can the borrower afford?
Monthly PI payment = ($30,000 � 12) x .28 = $700
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
A home costing $250,000 is worth $268,000 one year later. What is the one-year appreciation rate?
One-year appreciation rate = ($18,000 � 250,000) = 7.2%
A $100,000 property is expected to appreciate 5% each year for the next 3 years. What will be its appreciated value at the end of this period?
Appreciated value = $100,000 x 1.05 x 1.05 x 1.05 = $115,762.50
An office building has $200,000 net income and sold for $3,200,000. What was the rate of return?
Rate = ($200,000 NOI � 3,200,000 price) = 6.25%
An office building has $200,000 net income and a cap rate of 6.25%. What is its value?
Value = ($200,000 � 6.25%) = $3,200,000
An office building sells for $3,200,000 at a cap rate of 6.25%. What is its NOI?
Income = $3,200,000 x 6.25% = $200,000
A property sells for $180,000 one year after it was purchased. If the annual appreciation rate is 10%, how much did the original buyer pay for it?
The selling price is 110% of the purchase price. Therefore, the purchase price is the selling price divided by 1.1 (110%). $180,000 / 1.1 = $163,636.
An office building has NOI of $200,000, an annual reserve expense of $20,000, interest expense of $130,000 and annual depreciation of $50,000. Assuming a 28% tax bracket, what is its income tax liability?
Tax liability = ($200,000 + 20,000 - 130,000 - 50,000) x 28% = $11,200
ROI = ________________________
NOI / Price
An investment property generates a cash flow of $100,000 and appraises for $1,500,000. What is the owner's return on investment?
ROI = $100,000 � 1,500,000 = 6.67%
______________________ is the percentage you would make on your money if you paid cash for the property, and ___________ is what your actual percentage is when you factor financing into it.
Cap Rate / ROI
An investment property generates a cash flow of $100,000. The owner has $500,000 equity in the property. What is the owner's return on equity?
ROE= $100,000 � 500,000 = 20%
A tax rate on a house with a $200,000 taxable value is 7 mills per thousand dollars of assessed valuation. What is the tax?
Tax = ($200,000 � 1,000) x 7 mills = $1,400
Formula for converting Mill rates (tax)
Taxable value � 1,000 x Mill rate
A town has a total assessed valuation of $20,000,000 and exemptions of $4,000,000. What is the tax base?
$20,000,000 - 4,000,000 = $16,000,000
A town has a tax base of $160,000,000 and a budget of $8,000,000. What is the tax rate?
Tax rate = ($8,000,000 � 160,000,000 ) = .05, or 5%, or 50 mills
A town has a tax rate of 5% and a tax requirement of $8,000,000. What is the tax base?
Tax base = ($8,000,000 � 5% ) = $160,000,000
A town has a tax rate of 5% and a tax base of $160,000,000. What is the tax requirement?
Tax requirement = ($160,000,000 x 5% ) = $8,000,000
A $300,000 property sells at a 7% commission with a 50-50 co-brokerage split and a 60% agent split with her broker. What are total, co-brokerage, agent's, and broker's commissions?
Total commission = $300,000 x .07 = $21,000
Co-brokerage splits = $300,000 x .07 x .50 = $10,500
Agent split = $10,500 x .60 = $6,300
Agent's broker's split = $10,500 - 6,300 = $4,200
__________________________ is the amount that the seller profits (gets to keep in his pocket) after paying the expenses involved in the sale (commission rate, closing costs and any existing mortgage).
Seller's Net
A home sells for $260,000 and has a loan balance of $200,000 at closing. The commission is 7% and other closing costs are $2,000. What is the seller's net?
Multiply the sales price by the commission rate: 260,000 x .07 = $18,200
Subtract as needed: $260,000 sales price - $18,200 commission - $2,000 other closing costs - $200,000 loan balance = $39,800 seller's net
A home seller wants to net $50,000. The commission is 7%, the loan payoff is $150,000, and closing costs are $4,000. What must the minimum contract price be?
Add up the desired seller's net, the loan payoff and the closing cost: $50,000 + 150,000 + $4,000 = $204,000 seller's gross profit
Since the seller has agreed to a 7% sales commission, that means he will get to keep 93%, which is 0.93 as a decimal.
Divide
A property listed for $150,000 receives an offer for $120,000. The offer's percentage of listing price is:
$120,000 � $150,000 = 80%
____________________________________________________ When using this method for prorations, each month has 30 days not actual days within that month.
30-Day, Statutory Year, or 360-Day Method.
___________________________________ uses actually days in each month for prorations. For example, December has 31 days, and February has 28 days.
365-Day Method or Calendar Year
An annual tax bill is $1,800. Closing is on April 10. What is the seller's share of the taxes which are paid in arrears? 30 day method
Monthly amount = ($1,800 � 12) = $150; no. of months = 3
Daily amount = ($150 � 30) = $5.00; no. of days = 10
Proration = ($150 x 3) + ($5 x 10) = ($450 + 50) = $500 seller's share
An annual tax bill is $1,800. Closing is on April 10. What is the seller's share of the taxes? 365 day method
Daily amount = ($1,800 � 365) = $4.93
Jan 1 thru April 10 = (31 + 28 + 31 + 10) days, or 100 days
Proration = $4.93 x 100 days = $493 seller's share
Seller receives $1,000 rent. The month is � over.
Buyer's share is ($1,000 x 25%) = $250
Credit buyer / debit seller $250.
Buyer will pay $1,000 taxes. The year is � over.
Buyer's share is ($1,000 x 25%) = $250
Credit buyer / debit seller $750
An owner insures a home for $100,000. Replacement cost is $150,000. A co-insurance clause requires coverage of 80% of replacement cost to avoid penalty. Fire destroys the house. What can the owner recover from the insurer?
Insurance Policy Limit $100,000 / $150,000 Replacement Cost = .67 or 67% of replacement cost covered
Claim recovery = $100,000 x .8375 (67% cost covered � 80% required coverage) = $83,750 instead of the full $100,000 insurance coverage.