important_formulas
Table of Contents
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
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