How to Master Real Estate Math

By Maria O'Brien

If you are studying to be a real estate agent, you have had to learn basic real estate law, the ins and outs of mortgages and liens, zoning regulations, sales techniques, public relations, advertising and a whole new vocabulary to cover these areas. Compared to that, mastering real estate math will be a breeze. You’ll need to brush up on some of the basic math operations you learned in school and apply them to real estate situations.

Memorize the basic terms and formulas to determine the size of a property. You’ll need to know that area is the length times the width of a room or property and that it is expressed in square units (such as square feet or acres). Frontage is the distance the property has along the road or street. Memorize basic equivalencies, such as an acre is 43,560 square feet and 1 yard is 3 feet. Be sure you understand why a square yard is 9 square feet.

Learn to apply the basic formula for interest calculations. All mortgage loans charge interest, and you will need to have a thorough understanding of the math involved. The amount of interest charged is determined by how much money was borrowed, the rate at which it was borrowed and the term (length of time) of the loan. As a formula: I=PRT.

Practice working with percentages and decimals. You will need to be able to calculate using percentages to determine commissions, pro-rations, taxes and interest. Percentages are simply parts per hundred. Eight percent is eight parts per hundred. As a decimal, it would be .08. So in a math calculation involving interest using the formula above, if the rate charge on the loan was 8 percent, the principal would be multiplied by .08 to determine the interest for 1 year. Similarly, if an agent is going to earn a 3 percent commission on the sale of a $150,000 home, the commission would be $150,000 times .03, or $4,500. Often costs have to prorated between buyer and seller at closing. If the seller pre-paid his condo fee for the year and is selling after 3 months, then he is due a 75 percent refund (9/12) of the annual fee. This can be calculated by multiply the fee by .75. Taxes can be determined in the same way. If there is a 1 percent real estate transfer tax, it can be calculated by multiplying the sales price by .01.

Use logic and careful step-by-step methods to solve more complicated real estate problems, such as those involving appraisals and depreciations. The math in these problems employs basic multiplication, fractions, decimals and percentages. You just need to break the problems down and solve them one step at a time.