Table of Contents
Important Real Estate Formulas to Memorize (CA Exam)
Valuation & Appraisal
Financing
Income & Investment
Amortization
Brokerage & Commissions
Exam Tip
Important Real Estate Formulas to Memorize (CA Exam)
Valuation & Appraisal
Market Value (Income Approach)
Value = NOI ÷ Cap Rate
Cap Rate = NOI ÷ Value
Gross Rent Multiplier (GRM)
GRM = Sales Price ÷ Gross Rent
Value = Gross Rent × GRM
Gross Income Multiplier (GIM)
GIM = Sales Price ÷ Gross Income
Value = Gross Income × GIM
Cost Approach
Value = Land Value + Replacement Cost − Depreciation
Financing
Loan Amount
Loan = Purchase Price − Down Payment
Down Payment
Down Payment = Purchase Price × Down Payment %
Loan-to-Value (LTV)
LTV = Loan Amount ÷ Property Value
Equity
Equity = Market Value (or Sales Price) − Loan Balance
Income & Investment
Net Operating Income (NOI)
NOI = Gross Income − Operating Expenses
Cash Flow
Cash Flow = NOI − Debt Service
Rate of Return (basic)
Rate of Return = Annual Income ÷ Investment
Amortization
Monthly Interest
Interest = Loan Balance × Periodic Interest Rate
Principal Payment
Principal = Monthly Payment − Interest
New Loan Balance
New Balance = Old Balance − Principal Paid
Brokerage & Commissions
Commission
Commission = Sales Price × Commission Rate
Broker Gross Income
Gross Income = Total Commissions Earned (before expenses)
Exam Tip
If it says
no payments made
→ loan balance is unchanged
If it says
gross
→ ignore expenses
If it says
net
→ subtract operating expenses
Cap rate problems always revolve around
NOI