Fatskills
Practice. Master. Repeat.
Study Guide: Real Estate Math Ready Reckoner
Source: https://www.fatskills.com/real-estate-basics/chapter/real-estate-math-ready-reckoner

Real Estate Math Ready Reckoner

By Fatskills Exam Guides Team — the exam nerds behind 28,500+ quizzes and 2.1M practice questions across 500+ global exams.

⏱️ ~4 min read

Quick Reference Guide

Commission & Sales

Formula Equation Example
Commission Sale Price × Commission Rate = Total Commission $300,000 × 6% = $18,000
Net to Seller Sale Price - Commission - Closing Costs = Net $300,000 - $18,000 - $5,000 = $277,000
Price to Net Target (Target Net + Closing Costs) ÷ (1 - Commission Rate) ($250,000 + $5,000) ÷ (1 - 0.06) = $271,277
Agent's Split Total Commission × Agent's Percentage = Agent's Share $18,000 × 70% = $12,600
Commission Rate Commission Paid ÷ Sale Price = Rate $15,000 ÷ $250,000 = 6%

Investment & Valuation

Formula Equation Example
Capitalization Rate (Cap Rate) Net Operating Income ÷ Purchase Price = Cap Rate $30,500 ÷ $400,000 = 7.625%
Gross Rent Multiplier (GRM) Sale Price ÷ Annual Gross Rent = GRM $240,000 ÷ $24,000 = 10
Net Operating Income (NOI) Effective Gross Income - Operating Expenses = NOI $48,500 - $18,000 = $30,500
Cash-on-Cash Return Annual Cash Flow ÷ Total Cash Invested = CoC $8,500 ÷ $100,000 = 8.5%
Equity Current Market Value - Loan Balance = Equity $400,000 - $250,000 = $150,000
Return on Investment (ROI) (Total Gain - Total Cost) ÷ Total Cost = ROI ($500,000 - $480,000) ÷ $480,000 = 4.17%
Price per Square Foot Sale Price ÷ Square Footage = $/SF $350,000 ÷ 2,000 = $175/SF
The 1% Rule (Quick Test) Monthly Rent ÷ Purchase Price ≥ 1% $2,000 ÷ $200,000 = 1% (pass)
The 50% Rule (Estimate) Gross Income × 50% = Est. Operating Expenses $24,000 × 50% = $12,000

Finance & Mortgage

Formula Equation Example
Loan-to-Value Ratio (LTV) Loan Amount ÷ Appraised Value = LTV $180,000 ÷ $200,000 = 90%
Combined LTV (CLTV) (First Loan + Second Loan) ÷ Value = CLTV ($150,000 + $30,000) ÷ $200,000 = 90%
Simple Interest Principal × Rate × Time = Interest $200,000 × 5% × 1 year = $10,000
Discount Points Loan Amount × Number of Points = Cost $200,000 × 2 = $4,000
Monthly Interest Rate Annual Rate ÷ 12 = Monthly Rate 6% ÷ 12 = 0.5%
Monthly Payment (Estimate) Loan Amount ÷ 1,000 × $6–$8 = Monthly P&I $200,000 ÷ 1,000 × $7 = $1,400
Front-End Ratio (Housing) (PITI) ÷ Gross Monthly Income = Ratio $1,800 ÷ $8,000 = 22.5%
Back-End Ratio (DTI) Total Monthly Debt ÷ Gross Income = DTI $2,300 ÷ $8,000 = 28.75%
Private Mortgage Insurance (PMI) (Loan × PMI Rate) ÷ 12 = Monthly PMI ($180,000 × 0.5%) ÷ 12 = $75

Property Tax & Area

Formula Equation Example
Property Tax Assessed Value × Tax Rate = Annual Tax $250,000 × 1.2% = $3,000
Monthly Tax (Escrow) Annual Tax ÷ 12 = Monthly Tax $3,000 ÷ 12 = $250
Area – Rectangle Length × Width = Area 15 ft × 20 ft = 300 sq ft
Area – Triangle (Base × Height) ÷ 2 = Area (10 ft × 8 ft) ÷ 2 = 40 sq ft
Area – Circle π × Radius² = Area 3.14 × (10 ft)² = 314 sq ft
Acreage Total Square Feet ÷ 43,560 = Acres 10,000 sq ft ÷ 43,560 = 0.23 acres
Square Feet from Acres Acres × 43,560 = Sq Ft 0.5 acres × 43,560 = 21,780 sq ft
Sections to Acres Sections × 640 = Acres 1 section × 640 = 640 acres
Townships to Sections Townships × 36 = Sections 1 township × 36 = 36 sections

Prorations

Formula Equation Example
Daily Rate (365-Day) Annual Amount ÷ 365 = Daily Rate $3,600 ÷ 365 = $9.86/day
Daily Rate (360-Day) Annual Amount ÷ 360 = Daily Rate $3,600 ÷ 360 = $10.00/day
Prorated Amount (Daily) Daily Rate × Number of Days = Prorated $9.86 × 181 days = $1,784.66
Monthly Rate Annual Amount ÷ 12 = Monthly Rate $3,600 ÷ 12 = $300/month
Prorated Amount (Monthly) Monthly Rate × Number of Months = Prorated $300 × 6 months = $1,800
Seller's Responsibility (Annual ÷ 365) × Days Seller Owned ($3,600 ÷ 365) × 181 = $1,784.66
Buyer's Responsibility (Annual ÷ 365) × Days Buyer Owns ($3,600 ÷ 365) × 184 = $1,814.24

Appreciation & Depreciation

Formula Equation Example
Simple Appreciation (1 Year) Original Value × (1 + Rate) = Future Value $300,000 × 1.04 = $312,000
Compound Appreciation Original × (1 + Rate)^Years = Future $300,000 × (1.04)^5 = $364,995
Rule of 72 (Doubling Time) 72 ÷ Annual Appreciation Rate = Years to Double 72 ÷ 6% = 12 years
Tax Depreciation (Residential) Building Value ÷ 27.5 = Annual Depreciation $300,000 ÷ 27.5 = $10,909/year
Tax Depreciation (Commercial) Building Value ÷ 39 = Annual Depreciation $300,000 ÷ 39 = $7,692/year

Quick Conversions

Conversion Equation
Feet to Inches Feet × 12 = Inches
Inches to Feet Inches ÷ 12 = Feet
Square Feet to Acres Sq Ft ÷ 43,560 = Acres
Acres to Square Feet Acres × 43,560 = Sq Ft
Square Miles to Acres Sq Miles × 640 = Acres
Acres to Square Miles Acres ÷ 640 = Sq Miles
Percentage to Decimal Percentage ÷ 100 = Decimal
Decimal to Percentage Decimal × 100 = Percentage

Key Abbreviations

Abbreviation Meaning
LTV Loan-to-Value Ratio
CLTV Combined Loan-to-Value
PITI Principal, Interest, Taxes, Insurance
DTI Debt-to-Income Ratio
NOI Net Operating Income
GRM Gross Rent Multiplier
PMI Private Mortgage Insurance
SF / SQFT Square Feet
GLA Gross Living Area
PSF Per Square Foot
APR Annual Percentage Rate
ARM Adjustable Rate Mortgage
FHA Federal Housing Administration
VA Veterans Affairs

The 10 Most-Used Formulas (At a Glance)

  1. Commission: Price × Rate

  2. Net to Seller: Price - Commission - Costs

  3. LTV: Loan ÷ Value

  4. Cap Rate: NOI ÷ Price

  5. NOI: Income - Expenses

  6. Monthly Payment (Est.): Loan ÷ 1,000 × $7

  7. Front Ratio: PITI ÷ Income

  8. Back Ratio: Total Debt ÷ Income

  9. Area: Length × Width

  10. Acreage: Sq Ft ÷ 43,560


⚡ Recently practiced quizzes in this class
Legal Rights (Land) Real Estate Agent License Practice Test Commercial Real Estate Glossary Indiana Prelicensing Broker Course Questions Real Estate Basics Knowledge Test Modern Real Estate Practice In North Carolina PSI Real Estate Sales Exam Questions Real Estate Agent Practice Test Certified Apartment Manager Exam Questions Texas Real Estate Practice Exam

ADVERTISEMENT
 
❤ If you liked Fatskills, consider supporting us by checking out The Life Manuals You Never Got.

🌈  Our mission is to help improve your scores in any subject and exam withonline quizzes, practice tests, study guides, & advice for students. Since 2018.
About | Explore | User Guide | Topics | Subjects | Doubt Solver | Career Aptitude Test | Answers | Free Tools | OSHA Basics Quiz | What Should We Know?
Privacy | Terms |
Without work one finishes nothing. - Ralph Waldo Emerson
© 2026 Fatskills.com

All trademarks, logos and brand names are the property of their respective owners. All company, product and service names used in this website are for identification purposes only. Use of these names, trademarks and brands does not imply endorsement.