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1. 1. Pre-License Math Review10 Questions on state test<br />
2. 2. Calculating physical dimensions of Lot & Structure<br />Lot size 450 X 484<br />= 217,800 sq. ft.<br />Structure size <br />60 feet X 40 feet<br />= 2,400 square feet<br />Lot 1 , Block 1, Brown Acres<br />484 feet<br />Spot’s House<br />40 feet<br />60 feet<br />450 feet – Front Foot<br /> Easy street<br />
3. 3. What is property value?<br />Calculating size<br /> Lot is 450’ x 484’ = 217,800 square feet<br /> First # is front foot (street)<br />Land in this area sells for about \$30,000 per acre<br />What is the market value of this lot?<br />217,800 / 43,560 = 5 acres x \$30,000 = \$150,000<br />
4. 4. What is value of house?<br /> Spot’s house is 60’ x 40’ = 2400 square feet <br />Only heated and cooled area above ground is included in living area<br />Comparable homes sell for about \$120 per square foot plus land cost<br />2400 square feet X \$120 per sq. ft. = \$288,000<br />
5. 5. Land and House<br />What is the market value for this house and land?<br />2400 x \$120 = \$288,000 + \$150,000 land = \$438,000 <br />Market Value, Price, and Cost are not necessarily related <br />Except in new construction<br />
6. 6. \$438,000 Market Value<br />How much is a 10% commission?<br />How much is a 5% commission?<br />Divide the 10% fee in half to \$21,900<br />Listing broker splits 50/50 with selling broker<br />Listing agent gets 60/40 split with company <br />How much was check to agent?<br />
7. 7. 438,000 X .05 =<br />\$21,900 total commission<br />50% to selling broker = \$10,950<br />Listing broker then splits<br />60% to listing agent = \$6,570<br />40% to listing brokerage = \$4,380<br />
8. 8. LTV = Loan to Value<br />New buyer got an 80% LTV mortgage<br />How much was loan?<br />VA 100%<br />Rural 100%<br />FHA 96.5%<br />Conventional 80%<br />
9. 9. \$438,000 X .8 = \$350,400 conventional loan<br />Buyer paid origination fee of 1 point<br />A point is 1 % of loan, not purchase price<br />How much for fee?<br />\$3,504<br />Buyer paid 3 discount points <br />Increases lender’s yield by 3/8 %<br />How much for points?<br />\$10,512<br />Loan points are based on loan amount<br />May be added into loan<br />
10. 10.
11. 11. Interest rate is 6% on \$350,400<br />How much is payment (amortized loan) of 30 years<br />Rate chart 30 years @ 6% = Factor of 6<br />350.4 X 6 = \$2,102 payment of Principle & Interest<br />Taxes and Insurance will be on top of P&I<br />It’s a PITI the payment is so much<br />
12. 12. \$2,102 monthly payment<br />\$350,400 loan X 6% (.06) / 12 = interest first month<br />\$21,040 annual interest / 12 months = <br />\$1,752 first month interest<br />\$2,102 payment - \$1,752 interest = \$350 principle<br />Entire first year’s principle will only be about \$4,200<br />First year’s interest will be about \$21,000<br />Second month loan balance<br />\$350,400 - \$350 = \$350,050<br />Second month interest<br />\$350,050 X .06 = 21,003 / 12 = \$1,750<br />
13. 13. Proration<br />Closing on 21th of month<br />Use banker’s year of 360 days, 12 months, 30 day month<br />Unless told to use calendar year<br />Prepay interest for 10 days, includes day of closing<br />\$350,400 X .06 = \$21,024 / 360 = <br />\$58.40 per day X 10 days = \$584.00<br />Pays interest for balance of month of closing<br />First payment will be due the 1st of second month<br />Will include interest for first month after closing<br />
14. 14. Decimal to percentage<br />0.25 = 25%<br />0.9 = 90%<br />Percentage to decimal<br />33% = 0.33<br />10% commission <br />Multiply sales price by 0.10<br />
15. 15.  <br /> “T” Formula<br />________Results________\$10,000 Commission Paid<br /> Base Rate \$100,000 Sales Price .10 (or 10%) Commission Rate<br />Rate is expressed as a decimal<br />Multiply bottom #s or divide top # by bottom # Base X Rate or Results / Base or Results / Rate<br />Results / Base = Rate 10,000 / 100,000 = .10<br />Results / Rate = Base 10,000 / .10 = 100,000<br />Results = Base X Rate 10,000 = 100,000 X .10<br />:<br />:<br />:<br />:<br />X<br />X<br />
16. 16. \$10,000 Commission Paid<br />Results<br />:<br />:<br />Base<br />Rate<br />X<br />\$100,000 Purchase Price<br />10% (.10) Commission Rate<br />
17. 17. Property sold for \$100,000<br />Commission was \$3,000<br />What was Rate?<br />Results<br />:<br />:<br />Base<br />Rate<br />X<br />
18. 18. \$3,000<br />Results<br />:<br />:<br />Base<br />Rate<br />X<br />\$100,000<br />0.03<br />
19. 19. If the numbers are in the wrong place, you will know it<br />\$100,000<br />Results<br />:<br />:<br />Base<br />Rate<br />X<br />\$3,000<br />3333%<br />
20. 20. Commission was \$8,000<br />Rate was 8%<br />What was price of property?<br />Results<br />:<br />:<br />Base<br />Rate<br />X<br />
21. 21. \$8,000<br />Results<br />:<br />:<br />Base<br />Rate<br />X<br />\$100,000<br />.08<br />
22. 22. Seller wants \$100,000 <br />Seller said add commission to price<br />Commission is 10%<br />What is selling price?<br />Results<br />:<br />:<br />Base<br />Rate<br />X<br />
23. 23. \$100,000<br />Results<br />:<br />:<br />Base<br />Rate<br />X<br />100% - 10% = .90<br />\$111,111<br />
24. 24. Discount Points<br />2 points = 2% of prepaid interest<br />Paid \$4,000 in discount points<br />How much is loan?<br />Results<br />:<br />:<br />Base<br />Rate<br />X<br />
25. 25. \$4,000<br />Results<br />:<br />:<br />Base<br />Rate<br />X<br />.02<br />\$200,000<br />
26. 26. Seller made \$25,000 profit on \$100,000 sale<br />What is profit %<br />Results<br />:<br />:<br />Base<br />Rate<br />X<br />
27. 27. 25,000<br />Results<br />:<br />:<br />Base<br />Rate<br />X<br />100,000 – 25,000<br />.33 or 33%<br />
28. 28. Investor expects a 10% ROI (return on investment)<br />Monthly net income is \$1,000<br />What will investor pay for property?<br />Results<br />:<br />:<br />Base<br />Rate<br />X<br />
29. 29. \$1,000 X 12<br />Results<br />:<br />:<br />Base<br />Rate<br />\$120,000<br />X<br />.10<br />
30. 30. What did an investor pay if they made 10%<br />And, sold the home for \$100,000<br />Results<br />:<br />:<br />Base<br />Rate<br />X<br />
31. 31. \$100,000<br />Results<br />:<br />:<br />Base<br />Rate<br />X<br />100% + 10% = 1.10<br />\$90,909<br />
32. 32. The value of a house is \$91,000 today.<br />What was the original cost if it has depreciated 5% per year for the past seven years?<br />Results<br />:<br />:<br />Base<br />Rate<br />X<br />
33. 33. \$91,000<br />Results<br />:<br />:<br />Base<br />Rate<br />X<br />100% - (5% X 7) = .65<br />\$140,000<br />
34. 34. If a home is worth \$91,000 today and has appreciated 5% for the past 7 years, what was the original price?<br />Results<br />:<br />:<br />Base<br />Rate<br />X<br />
35. 35. \$91,000<br />Results<br />:<br />:<br />Base<br />Rate<br />X<br />100% + (5% X 7) = 1.35<br />\$67,407<br />
36. 36. What did the owner originally pay for their home if they sold it for \$98,672, which gave them a 12% profit over the original cost? <br />Results<br />:<br />:<br />Base<br />Rate<br />X<br />
37. 37. \$98,672<br />Results<br />:<br />:<br />Base<br />Rate<br />X<br />\$88,100<br />100% + 12% = 1.12<br />
38. 38.
39. 39. If you get a 90% loan on a \$88,500 house, how much more money must you put down after your \$4,500 earnest money?<br />Results<br />:<br />:<br />Base<br />Rate<br />X<br />
40. 40. \$8,850<br />Results<br />:<br />:<br />Base<br />Rate<br />X<br />\$88,500<br />.10<br />\$8,850 - \$4,500 (Earnest Money) = \$4,350 Additional \$<br />
41. 41. What did the owner originally pay for their home if they sold it for \$98,672, which gave them a 12% profit over the original cost? <br />Results<br />:<br />:<br />Base<br />Rate<br />X<br />
42. 42. \$98,672<br />Results<br />:<br />:<br />Base<br />Rate<br />X<br />\$88,100<br />100% + 12% = 1.12<br />
43. 43. Capitalization Rate = Return on investment <br /> “T” Formula<br /> Results<br />Base Rate<br />Investor demands a 10% Return; could be 15% or any number<br />This as the Rate in the “T” Formula - Must change to decimal .10 <br />Rate always goes on bottom right<br />You may not get the net income, but be given the numbers to calculate it<br />The way to calculate net income isGIVEN<br />GI \$100,000 Gross Income: 100 apartments renting for \$1000 per month<br />V - \$5,000Vacancy is 5% (of Gross Income) <br />E- \$30,000Expenses are 30% (of Gross Income) <br />N = \$65,000 Net Income (Before Taxes)<br />Net income for one month, so multiply by 12 to get annual income = \$780,000<br />\$780,000 is the Result,(top #) <br />you know the Rate (bottom right #) is .10 <br />you want the Base (bottom left)<br />Divide the Net Income (Results) of \$780,000 by the Rate of .10<br />:<br />:<br />X<br />
44. 44. \$780,000<br />Results<br />:<br />:<br />Base<br />Rate<br />.10<br />X<br />\$7,800,000<br />
45. 45. _____________\$780,000___________<br /> \$7,800,000 .10 <br />Capitalization Rate in this example is 10%<br />This apartment has a market value of \$7,800,000 <br />at a capitalization Rate of 10%<br />What if it sold for \$5,000,000?<br /> This means that the market (investors) require a higher rate of return of 15.6% Calculator said 0.156<br />With the “T” Formula, if you get an answer that look wrong, swap the Base # with the Result # and recalculate<br />7,800,000 / 780,000 would give a rate of return of 1000% and you would know that is wrong<br />Remember to move the decimal point two places to the right to get the percent .10 = 10%<br />:<br />:<br />X<br />
46. 46. Results<br />:<br />:<br />Base<br />Rate<br />X<br />