Real Estate Math
Calculations for commission, prorations, area, and financing
Key Concepts
Net Operating Income (NOI)
Net Operating Income (NOI) is the revenue a property generates after deducting all operating expenses.
Capitalization Rate (Cap Rate)
The capitalization rate (Cap Rate) is the rate of return on a real estate investment based on its expected income.
Property Value (based on Cap Rate)
In real estate, property value can be estimated by dividing the Net Operating Income (NOI) by the Capitalization Rate (Cap Rate).
IRV Formula
IRV stands for Income, Rate, and Value. It represents the relationship between Net Operating Income (I), Capitalization Rate (R), and Property Value (V).
Proration
Proration is the process of dividing expenses or income between the buyer and seller at the closing of a real estate transaction. This ensures each party pays or receives only their fair share based on the period of ownership.
Calculating Daily Rate
Daily rate calculation involves determining the cost or income per day by dividing the total amount by the number of days in the period (usually a year or a month). This is a fundamental step in proration.
Determining Ownership Days
Determining ownership days involves calculating the number of days each party (buyer and seller) owned the property during the relevant period (usually a year). This calculation is crucial for accurate proration.
Annual Interest Calculation
Annual interest is the total amount of interest charged on a loan or investment over a year.
Monthly Interest Calculation
Monthly interest is the portion of the total annual interest that is paid or accrued each month.
Percentage to Decimal Conversion
Converting a percentage to a decimal involves dividing the percentage value by 100.
Practice Questions
The return of land to the grantor or grant- or’s heirs when the grant is over is BEST described as
Which of the following BEST defines real property?
Which of the following instruments does NOT transfer an interest in real property?
A man died without a will and with no sur- viving relatives. His four-acre farm will
If a buyer and seller decide to rescind a deal after the deed has been recorded, the buyer is to:
The Real Estate Commissioner’s rules:
A property’s cost basis is most affected by an owner’s:
The annual percentage yield (APY) applies to:
A subdivider needs to give a copy of the Real Estate Commissioner’s public report to:
Any individual may contact the Real Estate Commissioner to:
The period of time a structure continues to earn sufficient income to continue operations is referred to as the structure’s:
Which of the following is of least interest to an appraiser?
All of the following are sufficient to transfer an interest in real estate, except:
In a deed that states “to Jonathon for his life,” the grantor has what type of interest?
Property taxes on a Texas home are $6,000 per year. The sale closes on April 1. How much does the seller owe for prorated taxes?
A Florida property sold for $400,000. Calculate the documentary stamp tax on the deed:
A buyer takes a $250,000 mortgage in Florida. What is the intangible tax?
A property sells for $325,000. If the commission is 6%, split equally between listing and selling brokers, what does each broker receive?
A property is assessed at $250,000. The tax rate is $2.50 per $100. What is the annual tax?
A property sells for $350,000 in Florida. The documentary stamp tax on the deed is:
+ 63 more questions
Other Exam Topics
Buyer Representation Agreement
8% of exam
Property Ownership
10% of exam
Land Use Controls and Regulations
8% of exam
Valuation and Market Analysis
10% of exam
Financing
12% of exam
Laws of Agency
12% of exam
Mandated Disclosures
6% of exam
Contracts
12% of exam
Transfer of Title
8% of exam
Practice of Real Estate
10% of exam
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