RealEstate MATH

1
RealEstate MATH

• Barbara Grodaes

2
Calculator

• Press On/C, Set x, Set 9
• Remember you only have to press On/C once to
  clear whats on the display, twice will cancel
  everything EXCEPT what you have entered into Term
  and/or Int!
• Set changes the buttons to what is green (Set
  and M is M-subtract from memory! OR Set
  and Amort is Balance! LOOK at buttons)
• Remember to press to display result

3
Calculator Defaults

• Inc AND Tax are annualyou know yearly
  amount, enter , press buttonyou know monthly
  amount, enter , press Per, then button
• Debt AND Exp are monthlyyou know monthly
  amount, enter , press buttonyou know yearly
  amount, enter , divide by 12 , then
  button
• Number of payments is 12 unless changed turning
  Off OR pressing On/C On/C DOES NOT set this
  back to 12 BUT Set x, Set 9 does Rcl
  will display Pmt/Yr to set back to 12,
  press 12 Set

4
Calculation of Area

• Rectangles and Squares (Area length x width)
• Trapezoids (Area (length length) x height /
  2)
• Triangles (Area base x height / 2)

5
Metric Conversion

• Conversion tables on back of calculator
• Real Estate is measured by Metric, not imperial!
• When imperial measurement such as yards, feet and
  inches, change all units to feet before
  converting to metres(e.g. 3 yards, 2 feet, 3
  inches 11.25 feet, then convert)

6
Formulas simple interest

• I P x R x TInterest principal x rate x
  timeInterest will be a dollar amountrate will
  be an interest rate shown in
• if you know the interest and any 2 of the other
  elements, you rearrange the formula to find the
  3rd (I always on TOP)

7
Finding 1 out of 3 (PRT?)

• I PxRxT
• P I (RxT)
• R I (PxT)
• T I (PxR)

IInterestPPrincipalRRateTTime
For P, R or T, write out the formula and plug in
what you know multiply what is in brackets
FIRST, then divide interest by the (answer)
8
Formulas compound interest

• compound semi-annual I P x R x TInterest
  principal x rate x timesame formula, EXCEPT
  time is 6/12
• To calculate 1 year of compounded interest,
  PxRx.5?1, then ADD this answer (?1) to the
  principal newPxRx.5?2 add answers
  (?1?2interest for 1 year)

9
Date Math

• Calculate date by of daysMonthDayYear
  (or-) dayse.g. use this to calculate
  listing expiration date
• Calculate of days by dateMonthDayYear
  (or-) MonthDayYeare.g. use this to
  calculate of days for Interest Adjustment
  number of days to plug into formula

10
Mortgage Components

• L/A Loan Amount
• Pmt Payment
• Term Number of Amortization Years
• Int Annual Interest Rate
• Note
• TermTerm Number of periods
• IntInt periodic rate of interest
• PmtPmt will display PIT if annual Tax is
  enteredbe careful because if Exp is entered,
  this will display PITH

11
Solving Loan Problems

• L/A, Pmt, Term and Int are basis for
  solving loan problemsIf you enter in 3 of the 4
  such as L/A, Term and Int, then press
  Pmt, calculator will display blended monthly
  payment (PI). A second pressPmt, will display
  payment including taxes (PIT) as long as annual
  taxes are already entered.
• Once entered, change any variable and
  re-calculate your new answer with-out
  re-entering all of the other data!
• Dont press On/C On/C or you will lose all
  inputs except Term and Int! (press only once)

12
Sales Price / Down Payment

• In conjunction with L/A, Sales Price and
  DnPmt Down Payment, enter any two and solve for
  the third
• Price stores or calculates based on L/A and
  DnPmt
• DnPmt stores (either or ) or calculates
  based on L/A and Price
• DnPmtDnPmt toggles either or Enter Down
  Payment by entering number less than 100,
  displays Enter Down Payment by entering number
  greater than 100, displays

13
Mortgage Insurance Premium

• of purchase price of loan
• Up to and including 65 0.50
• Up to and including 75 0.75
• Up to and including 80 1.25
• Up to and including 85 2.00
• Up to and including 90 2.50
• Up to and including 95 3.75

14
Loan-to-Value Calculation

• Conventional loan Loan-to-Value 75 or lower
• High-ratio loan Loan-to-Value over 75 to max of
  95
• Divide Mortgage required by Sale Price to find
  Loan-to-Value percentage

Mortgage amount required

Loan-to-Value
Sale Price
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Analyze Loan-to-Value

• If conventional, mortgage amount required is
  L/A to use in further calculationsmortgage
  required total loan amount
• If high-ratio, add Insurance premium to
  mortgage amount required and this new amount
  becomes L/A to use in further
  calculationsmortgage required insurance
  premium total loan amount

16
Estimating Mortgage Balance

• Having already entered L/A Pmt Term and
  Int, you can estimate balances prior/end of
  loan by pressing the Amort button
• Set Amort will give you the remaining balance
  first - continue pressing Amort to scroll
  through same displays of information as Amort
  alone.

17
Mortgage Balance Keystrokes

• Amort finds total interest, principal and
  remaining balance
• 1st press shows range of periods (you can enter a
  new range of periods here if you want)
• 2nd press shows total interest for period range
• 3rd press shows total principal for range
• 4th press shows remaining balance at end of range

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Keystrokes Continued

• Amort and Set Amort displays information
  concerning years when preceded by single year or
  range of years.
• Amort shows info for that ()year starting
  with period range of that year continue
  pressing button for more information the total
  interest and total principal are total for that
  year only and the last press will give you the
  remaining balance
• Set Amort show same information but
  starts with remaining balance
• Amort show information for that
  series of years starting with period range the
  total interest and total principal are total for
  that period only and the last press will give you
  the remaining balance
• Set Amort show same information
  for that series of years but starts with
  remaining balance

19
Keystrokes Continued

• Per Amort displays information concerning
  payments when preceded by single payment or range
  of payments.
• PerAmort shows info for that ()payment
  starting with period range of that payment
  continue pressing button for more information
  the total interest and total principal are total
  for that payment only and the last press will
  give you the remaining balance of mortgage
• Set Per Amort same information but
  starts remaining balance
• Per Amort show information for
  that series of payments starting with period
  range the total interest and total principal
  are total for that series of payment only and the
  last press will give you the remaining balance
• Set Per Amort same information
  for that series of payments but starts with
  remaining balance

20
Interim Financing

• Financing necessary for a short period of days or
  weeks is Interim Financing. The cost of this
  financing is calculated using simple interest and
  you will know the P, R and T however the T is of
  days/365 I P x R x TInterest principal x
  rate x of days/365

21
Payout Penalty

• Payout Penalty is the greater of 3-month interest
  penalty or interest differential
• Mortgage balance x mortgage interest rate x 3/12
  ___
• Mortgage balance x (mortgage interest rate
  subtract (-) current interest rate) x number of
  years remaining on term ____

22
Averaging Mortgage Interest

• You average mortgage interest to determine which
  is the least cost for your client refinance a
  new first mortgage OR assume an existing mortgage
  and arrange a new 2nd mortgage
• Determine what is most economical

23
Calculating Averaging

• Existing mortgage x interest rate ____Second
  mortgage x interest rate ____Add both answers
  InterestAdd both mortgages Principal
• R I R Interest (PxT) (Principal x1)
• R answer x 100 ____

24
Qualifying the Buyer

• Five Cs of Credit for Qualifying

• Character
• Capital
• Capacity
• Collateral
• Credit

25
Debt Service Ratios

• Gross Debt less than 32 of gross income to pay
  PITH (1/2 condo fees)
• Total Debt less than 40 of grossincome to pay
  PITHOD (1/2 condo fees)
• PI T H (1/2 cf) OD Gross Monthly Income

Less than 32 Less than 40
x
100 ____
26
Remember Defaults

• Inc AND Tax are annualyou know yearly
  amount, enter , press buttonyou know monthly
  amount, enter , press Per, then button
• Debt AND Exp are monthlyyou know monthly
  amount, enter , press buttonyou know yearly
  amount, enter , divide by 12 , then
  button
• Number of payments is 12 unless changed turning
  Off OR pressing On/C On/C DOES NOT set this
  back to 12 BUT Set x, Set 9 does Rcl
  will display Pmt/Yr to set back to 12,
  press 12 Set

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Qualify Using Calculator

• First, Rcl Qual1 ensure set at 32.00-40.00.
  If not displayed as this, enter 32 40
  Qual1
• Enter Inc, Debt, Exp Tax and L/A, then
  Qual1 Qual1 to display GDSR TDSR
• Enter Inc, Debt, Exp Tax (but NOT L/A),
  then Qual1 Qual1 to display maximum loan
  amount qualified for(remember this max includes
  ins. fees! not net loan for deal)
• Enter L/A, Term, Int Tax and Exp, then
  Qual1 Qual1 to display Income necessary to
  verify a mortgage amount

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Qualify Continued

• If qualifying for condo, include ½ condo fees
  with heat in the Exp button
• Remember Qual1 Qual1 displays different
  values depending on what you have previously
  entered
• Good idea to On/C On/C first when you want
  the Qual1 Qual1 to display the different
  values

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Capitalization Rate

• V I R
• R I V
• I RxV

VValueINet IncomeRCapitalization Rate
This formula is used when an investor uses a
capitalization rate with the net operating annual
income to determine the maximum an investor can
pay to achieve the value.
Net Income
Cap Rate
Value
30
City Formula

• V T R
• R T V
• T VxR

VAssessed ValueTTaxesRMill Rate
Taxes Assessed Value x Mill Rate x .001.
Taxes
Assessed Value
Mill Rate
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Qualify Formula

• I PIT G
• G PIT I
• PIT GxI

PITprincipal, interest, tax paymentIIncomeGGD
SR or Gross Debt Service Ratio
PIT
Income
GDSR
32
Using Memory Functions

• Rcl M recalls and displays total value in
  memory
• M adds the displayed value to memory
• Set M subtracts displayed value from value
  in memory or adds negative number to memory
• Rcl Rcl displays total value in memory and
  clears memory
• Set Rcl clears memory without changing
  displayed value
• Set Rcl M clears memory and puts displayed
  value into memory