Return to flip book view

Real Estate Math Terms Ad valorem The Latin phrase ad valorem means accordingto value Amortization Amortization is when payments divideinto equal amounts for the duration of the loan Appraisal An appraisal is an estimate of the approximate value of something Appreciation Appreciation is any gain in the valueof a property over time from any cause Capitalization Capitalization is the conversion of assets or income into capital Capitalization rate Cap rate is used to indicate the rate of return that is expected to be generated on a property Cetris peribus A Latin phrase meaning other thingsequal or in plain terms all things remaining constant Commission A commission is a fee paid to an agentfor performing a transaction Debt Something owed or promised Depreciation Depreciation is any loss in the valueof a property over time from any cause Discount points Discount points also known as mortgage points are prepaid interest Double net lease Double means two additional costs will be added to your base rent Usually taxes and insurance costs are added to the monthly lease payment Equity Equity is the difference between the marketvalue of your home and the amount you owe the lender who holds the mortgage Escrow Escrow is a way for money and property tobe transferred from one party to another through the use of a neutral third party agent also known as an escrow agent Escrow makes it a lot safer for both buyers and sellers to close the sale without worrying about getting snubbed or cheated Gross rent multiplier The ratio of the price of a real estate investment to its annual rental income before accounting for expenses such as property taxes insurance and utilities More specifically it s a measure of the value of an investment property that is obtained by dividing the property s sale price by its gross annual rental income Interest money paid or owed regularly at a particularrate Investment An investment is the legal purchase ofsomething that is not consumed today but will be in the future to create profit Mill rate The mill rate is the amount of tax payable per dollar of the assessed value of a property Mill rate is also known as the millage rate Net listing A net listing is when an agent agreesto sell an owner s property for a set minimum price Anything over the minimum price belongs to the agent as commission Net operating income The total income of a propertyminus all operating expenses Property tax Property tax is a real estate ad valorem tax calculated by local government which is paid by the owner of the property The tax is usually based on the value of the owned property Principal The amount borrowed such as the face value of a debt security Tax rate The tax rate is the designated rate thegovernment taxes a person business or entity Triple net lease Triple means three additional costs will be added to your base rent Usually taxes insurance and maintenance are all added to the monthly lease payment

Real Estate Math FormulasCommission Formula● Commission = (house selling price) x (commission percentage)Simple Interest Formula● Interest = (principal amount) x (rate of interest) (time)Gross Rent Multiplier Formulas● Gross Rent Multiplier = (property price) / (gross rental income)● Annual Gross Rental Income = (monthly rental income) x (12)● 28/36 Rule or “The Mortgage Rule of Thumb.” Formula● Housing costs to qualify for most loans = (gross monthly orannual income) x (.28)Discount Points Formulas● Discount Points = Prepaid Interest● Break Even Point = (points cost) / (monthly payment savings)Property Tax Formulas● Property Tax Rate = (assessed value) x (mill rate)● Assessed Value = (assessment rate) x (market value)● 1 mill = equal to 1/1,000th of a dollar or $1 in property tax.Other Useful Real Estate Math Formulas● 1 Acre = 43560 square feet● Area (ft2) = (length ft) x (width ft)● Perimeter = (side) + (side) + (side) + (side)