Real Estate Exam Math Formulas — With Worked Examples
Real estate exam math is a small set of formulas used over and over — commission, proration, loan-to-value, cap rate, property tax and a few more. Each one below shows the formula and a fully worked, checked example so you can see exactly how the numbers move. Learn the formulas, then practice real estate calculation questions.
Practice real estate calculation questions →The formulas
Commission
Sale price × rate, then apply the brokerage and agent splits.
Formula & worked example →Proration
Split annual taxes/rent between seller and buyer by the days each owns.
Formula & worked example →Loan-to-Value (LTV)
Loan ÷ value; the complement of the down-payment percentage.
Formula & worked example →Capitalization Rate (Cap Rate)
NOI ÷ value (the IRV triangle) — the income approach to value.
Formula & worked example →Property Tax (Mills)
Assessed value × mill rate ÷ 1,000 (a mill is one-thousandth of a dollar).
Gross Rent Multiplier (GRM)
Price ÷ gross rent — a quick value screen using gross (not net) rent.
Transfer Tax
Sale price ÷ the taxable increment × the tax per increment.
Area & Acreage
Length × width for area; 43,560 square feet = 1 acre.
Discount Points
One point = 1% of the loan amount, paid to lower the interest rate.
Qualifying Ratios
Front-end (housing) and back-end (total debt) ratios of gross monthly income.
Seller's Net
Work backward from the price the seller must net to find the sale price.
Appreciation & Depreciation
Value change as a percentage of the original (or straight-line) basis.
Price per Square Foot
Price ÷ square footage — used to compare and adjust comparables.
Simple Interest
Interest = principal × rate × time (the basis of loan-interest problems).