Transcription
UnderstandingReal EstateMathPresented by:
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UNDERSTANDINGREAL ESTATEMATHM CEPublished in the United States of AmericaBy: State Continuing Education/CE Source LLC1.800.943.5573www.cesource.comCopyright 2015: State Continuing Education/CE Source LLC. All rights reserved. No part of thispublication may be reproduced, stored in a retrieval system, or transmitted in any form or by anymeans, electronic, mechanical, photocopying, recording or otherwise, without the prior writtenpermission of the Publisher.Although great effort has been made to ensure this publication contains accurate and timelyinformation, it is provided with the understanding that the author and publisher is not engaged inrendering legal, accounting, tax, or other professional service. If professional advice is required, theservices of a competent advisor should be sought.
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Table of ContentsChapter One.1Measurements And Legal Descriptions . 1Measurement of Dimensions . 1Linear Measurement . 2Irregular Lots . 2Perimeter. 2Area . 2Area Example 1 .2Area Example 2 .2Area Example 3 .2Squares . 3Calculating Areas within Areas .4Acres. 5Converting Measurements to/from Feet . 5Converting Feet to Yards. 5Converting Feet to Acres . 6Front Feet . 6Price Per Front Foot. 7Price Per Front Foot Example . 7Area of Triangles . 7Triangular Area Example 1 . 8Triangular Area Example 2 . 9Cubic Measurements . 9Cubic Measurement Example . 10Metric Equivalents . 10Metric Equivalent Example . 10Summary of Measurements . 11Legal Descriptions . 12Metes-and-Bounds and Monument Descriptions. 13Metes and Bounds Example 1. 14Metes and Bounds Example 2. 14Blocks and Lots . 16Plats . 17U.S. Government Survey System . 17Township Sections . 18Calculating Number of Acres in a Tract . 20Summary of Legal Descriptions . 21Chapter Two .23Percentages, Interest and Mortgages . 23Percentages . 24Calculating Percentage Problems. 24 State Continuing Education/CE Source LLCwww.cesource.comPage iii
UNDERSTANDING REAL ESTATE MATHPercentage of Depreciation . 25Percentage of Purchase Price . 25Converting a Percentage to a Decimal . 25Converting a Decimal to a Percentage . 26Using a Calculator . 26Commission. 27Splitting Commissions . 28Verifying Commissions . 29Calculating Incremental Commissions. 29Incremental Commission Example 1 . 29Incremental Commission Example 2 . 30Rate of Return . 30Calculating Interest . 31Time . 31Normally Annual . 31Compounding Frequencies . 31Defining a Year . 32Simple Interest Formula . 32Finding the Rate. 32Finding the Time . 32Finding the Principal. 33Finding Annual Interest . 33Quarterly Interest . 33Monthly Interest . 33Daily Interest . 33Prorating and Daily Interest . 33Daily Proration Example 1 . 34Daily Proration Example 2 . 34Total Amount of Interest Earned . 35Compound Interest Formula . 36Compound Interest Example. 36Compound Interest Tables . 37Sample Compound Interest Table (Annual Compounding) . 37Summary of Interest Formulas . 38Mortgages and Math . 39Down Payments . 39Calculating Down Payments . 39Down Payment Example 1 . 39Down Payment Example 2 . 40Down Payment Example 3. 40Calculating Loan – To –Value. 40Loan-to-Value Example 1 . 40Loan-to-Value Example 2 . 40Loan-to-Value Example 3 . 40Loan-to-Value Example 4 . 41FHA Loans . 41FHA Financing Example . 41Mortgage Insurance Premium . 41 State Continuing Education/CE Source LLCwww.cesource.comPage iv
UNDERSTANDING REAL ESTATE MATHMortgage Insurance Premium Example . 42Loan Commitment Fees. 42Loan Origination Fees. 42Loan Discount Points . 42Loan Discount Points Example 1. 42Loan Discount Points Example 2. 43Qualifying For a Loan . 43Loan Payment to Income Ratio Example . 43Debt to Income Ratio Example . 43FHA Requirements . 43VA Requirements . 43Real Estate Loans and Interest . 44Loan Interest. 44Loan Principal Calculation . 44Principal and Interest Calculation. 44Amortization . 46Amortized Loan Illustrations . 47Sample Amortization Loan Table – First Three Years . 47Amortization Loan Payment Tables . 48Amortized Loan Payment Example 1 . 48Amortized Loan Payment Example 2 . 48Amortization Loan Payment Table . 49Per 1000. 49Calculating Total Loan Payments . 49PITI Calculation Example . 50Calculating Interest and Principal in Amortized Loans . 50Principal and Interest in Amortized Payment Example . 50Summary . 51Chapter Three.53Depreciation . 53Accounting and Depreciation . 53Straight Line Depreciation . 54Straight Line Depreciation Example . 54Salvage Value. 54Example of Straight Line Depreciation Schedule . 55Declining Balance Method . 55Net Book Value . 56Calculating Depreciation Under the Declining Balance Method . 56Example of Double Declining to Straight Line Depreciation . 56Taxes and Depreciation . 57Property Types. 57Leased Property. 58Life Tenancy . 58Property That Cannot Be Depreciated. 58Land . 58Property Placed in Service and Disposed of In the Same Year . 58 State Continuing Education/CE Source LLCwww.cesource.comPage v
UNDERSTANDING REAL ESTATE MATHEquipment Used to Build Capital Improvements . 58Section 197 Intangibles . 59Depreciation Period . 59The Modified Accelerated Cost Recovery System . 59Recovery Periods . 59Office in the Home and Recovery Period . 60Placed-In-Service Date . 60Basis . 60Recovery Periods Under ADS . 61Additions and Improvements . 61Depreciation Methods Under MACRS. 61Calculating Depreciation Under MACRS . 63MACRS Worksheet . 63MACRS Worksheet . 64The Declining Balance Method Under MACRS . 65Straight Line Method Under MACRS . 65MACRS Recovery Periods for Property Used in Rental Activities . 66Depreciation and Appraisals . 66Depreciation . 67Physical Depreciation . 67Functional Obsolescence . 67Normal Deficiency . 67Modernization . 67Superadequacy . 67Economic Obsolescence . 68Depreciation and Time . 68Effective Age . 68Remaining Economic Life . 68Total Economic Life . 68Economic Life Example 1 . 68Economic Life Example 2 . 69Calculating Depreciation . 69Capitalization of Income . 69Depreciation and Capitalization of Income . 70Economic Age-Life Method . 70Example of Economic Age-Life Method . 71Modified Age-Life Method . 71Observed Condition Method . 71Using Depreciation Tables . 72Sales Comparison Method of Depreciation . 72Summary . 73Chapter Four .75Real Estate Taxes . 75Tax Assessed Value . 75Texas Homestead Exemption . 75Tax Rates . 76Calculating Property Taxes . 76 State Continuing Education/CE Source LLCwww.cesource.comPage vi
UNDERSTANDING REAL ESTATE MATHMore Than One Tax Rate. 76Special Assessments . 77Documentary Stamp Tax. 77Summary . 78Chapter Five.79Closing Calculations . 79Completing a Closing Statement. 80Credits to the Buyer . 80Credits to the Seller . 80Non-Balancing Entries . 80Prorations . 81Property Taxes . 81Prorating Property Taxes Example . 81Mortgage Interest . 82Prorating Mortgage Interest Example . 82Prepaid Rent . 83Disclosures and Sample Forms . 84Other Settlement Statement Forms . 89Summary . 92Glossary.
math. The value of real property is often closely related to its dimensions. Upon completion of this chapter, you will be able to: Use linear measurements to calculate perimeter Calculate the area of regular and irregular lots Calculate number of acres from square
