Real Estate Investing Math Applications

Real Estate Investing Math Applications

Residential Real Estate Broker · Payson, AZ · Member since 2009 · 3k+ posts · 1k+ votes

Firstly, if your name is Jon, JScott, Will, Bill or some other name I forgot but you know I'm talking to you. You're NOT allowed to answer the questions but ONLY allowed to correct and inform. Again, you're NOT allowed to give the answer but simply help if they're doing the formula wrong. Correct and inform on the formula but do NOT give the answer :mrgreen:

Here are some math questions that you might find interesting. They're not 'hard' by any means, you just have to make sure you understand the process of the math to get to the right answer.

What I'd like to do is see not only your answer but how you arrived to that answer. Hopefully, this will help you learn/master the process and help those that are still learning.

1: The property tax rate in Nick's area is $9.82 per $100 of assessed value. The assessed value is $9,290. What are Nick's taxes?

2: Nick's property has a market value of $80,000 and is to be insured at 85% of value. The insurance rate is $0.98 per $100 of insurance value for a 3-year period. What is the annual premium?

3: Nick has a home with an assessed value of $39,350. The tax is $12.20 per $100 of assessed value. What are Nick's taxes?

4: The county assesor says the full cash value of a 12,000 sq ft strip center you have listed is $825,000. Annual income is $12/sq. ft/year, minus a 14% vacancy rate and a 3% credit loss. Owner's expenses are: $23,000 property tax and $12,000/year insurance. What is the Cap Rate?

Lastly: My sister owns an apartment complex which rents as follows: 3 - 1br @ $350/mo; 15 - 2br @ $440/mo; 3 - 2br @$495/mo. You determine a 10% vacancy rate and 3% credit losses/year. The annual property tax is $7,300; the insurance is $2,100. She takes $6,500/year depreciation. An investment broker suggest 10.25% Cap Rate. What is your estimate of Value?

You don't have to do all of them if you don't want to. These are questions that I'll be getting tested on when I take my RE licensing exam. I already knew/know the answers but I wanted to give others an example to learn from.

Good luck, don't be scared to be wrong, be scared to NOT try

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Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
15y

Note that on problem #2, Nick says "$0.98 per $100 of insurance value for a 3-year period." and then asks "What is the annual premium?"

#5 is the same basic calculation as #4. You properly computed the cap rate, Kenneth, from the NOI and value (notwithstanding the insanity of using an assessment as a value). For #5 you know the cap rate and can compute the NOI...

See this reply in the discussion

58 Replies

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  • Residential Real Estate Broker · Payson, AZ · Member since 2009 · 3k+ posts · 1k+ votes
    15y

    ya, I was wondering how that looked. I typed that right before I left and was thinking it wasn't going to be there when I got back.

    Thankfully, I didn't get the ban hammer from Da' Man

  • Sharad M.Pro Member
    Carlsbad, CA · Member since 2010 · 1k+ posts · 1k+ votes
    15y

    I got a question:

    Divide $534 (in whole $ increments) into a number of bags so that I can ask for any amount between $1 and $534, and you can give me the proper amount by giving me a certain number of these bags without opening them. What is the minimum number of bags you will require?

  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    15y
    Originally posted by Max I:
    I got a question:

    Divide $534 (in whole $ increments) into a number of bags so that I can ask for any amount between $1 and $534, and you can give me the proper amount by giving me a certain number of these bags without opening them. What is the minimum number of bags you will require?

    10.

  • Full-Time Investor · Charlotte, NC · Member since 2009 · 2k+ posts · 1k+ votes
    15y

    yikes..how bout that for a first post?! welcome to bp nation giovanni :)

  • Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
    15y

    Go easy on Giovanni guys...I have spoken with him a few times on the phone and he is a legit guy. Geez...

  • Sharad M.Pro Member
    Carlsbad, CA · Member since 2010 · 1k+ posts · 1k+ votes
    15y
    Originally posted by J Scott:
    Originally posted by Max I:
    I got a question:

    Divide $534 (in whole $ increments) into a number of bags so that I can ask for any amount between $1 and $534, and you can give me the proper amount by giving me a certain number of these bags without opening them. What is the minimum number of bags you will require?

    10.

    How much in each bag?

  • Residential Real Estate Broker · Payson, AZ · Member since 2009 · 3k+ posts · 1k+ votes
    15y

    I got the edited hammer lol....

    I was just playing, C'mon :)

  • Developer · Member since 2010 · 72 posts · 31 votes
    15y

    Just curious on number two, the way it is worded it says annual premium, the quote is for three years. What is the correct way to read that? I think Jon also touched on this point.

    Thanks,

    Tony.

    Also, anyone here work on their CCIM? any recommendations/advice? Thanks.

  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    15y
    Originally posted by Max I:
    Originally posted by J Scott:
    Originally posted by Max I:
    I got a question:

    Divide $534 (in whole $ increments) into a number of bags so that I can ask for any amount between $1 and $534, and you can give me the proper amount by giving me a certain number of these bags without opening them. What is the minimum number of bags you will require?

    10.

    How much in each bag?

    $1. $2. $4. $8. $16. $32. $64. $128. $256. $512.

  • Real Estate Investor · Phoenix, AZ · Member since 2009 · 1k+ posts · 1k+ votes
    15y

    Jason, that is not a correct answer because you would need $1023 in order to fill your bags. The problem requires filling it with $534.

  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    15y
    Originally posted by Vikram C.:
    Jason, that is not a correct answer because you would need $1023 in order to fill your bags. The problem requires filling it with $534.

    Whoops, misread the question...

    Try 17:

    1
    2
    4
    8
    16
    32
    64
    128
    256
    1
    2
    4
    8
    1
    2
    4
    1

  • Real Estate Investor · Phoenix, AZ · Member since 2009 · 1k+ posts · 1k+ votes
    15y

    That's an elegant solution, Jason. But I believe it can be done with fewer bags.

  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    15y
    Originally posted by Vikram C.:
    That's an elegant solution, Jason. But I believe it can be done with fewer bags.

    Wait, you can't say, "I believe it can be done with fewer bags," without giving an alternate solution!!!

    :D

  • Real Estate Investor · Phoenix, AZ · Member since 2009 · 1k+ posts · 1k+ votes
    15y

    I am thinking. :)

  • Real Estate Investor · Phoenix, AZ · Member since 2009 · 1k+ posts · 1k+ votes
    15y

    My brain is not working well today so I am not confident this is the correct solution, but how about 12 bags?

    1
    2
    3
    4
    10
    20
    30
    60
    100
    100
    200
    4

  • Real Estate Investor · Phoenix, AZ · Member since 2009 · 1k+ posts · 1k+ votes
    15y

    Do these 11 bags work?

    1
    2
    4
    7
    10
    20
    30
    60
    100
    100
    200

  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    15y
    Originally posted by Vikram C.:
    Do these 11 bags work?

    1
    2
    4
    7
    10
    20
    30
    60
    100
    100
    200

    I like it!!!

  • Sharad M.Pro Member
    Carlsbad, CA · Member since 2010 · 1k+ posts · 1k+ votes
    15y
    Originally posted by J Scott:
    Originally posted by Vikram C.:
    Jason, that is not a correct answer because you would need $1023 in order to fill your bags. The problem requires filling it with $534.

    Whoops, misread the question...

    Try 17:

    1
    2
    4
    8
    16
    32
    64
    128
    256
    1
    2
    4
    8
    1
    2
    4
    1

    Jason, are you changing your answer to 17?

  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    15y
    Originally posted by Max I:

    Jason, are you changing your answer to 17?

    I was...until I saw Vikram's response... :D

  • Sharad M.Pro Member
    Carlsbad, CA · Member since 2010 · 1k+ posts · 1k+ votes
    15y
    Originally posted by J Scott:
    Originally posted by Max I:

    Jason, are you changing your answer to 17?

    I was...until I saw Vikram's response... :D

    Lol. So you are going with Vikram's answer on this one?

  • Real Estate Investor · Phoenix, AZ · Member since 2009 · 1k+ posts · 1k+ votes
    15y

    I have a feeling it can be reduced to 10. I think there is something suboptimal with my 100s. Will work on this tomorrow unless someone solves it before that.

    Sharad, good question. But I wonder how Nick feels about his thread being hijacked.

  • Sharad M.Pro Member
    Carlsbad, CA · Member since 2010 · 1k+ posts · 1k+ votes
    15y
    Originally posted by Vikram C.:
    I have a feeling it can be reduced to 10. I think there is something suboptimal with my 100s. Will work on this tomorrow unless someone solves it before that.

    Sharad, good question. But I wonder how Nick feels about his thread being hijacked.

    I feel bad about highjacking his thread. I will post this in a new thread, I have some other questions too that I can post on that thread. I won't post the answers until tomorrow.

  • Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    15y
    Originally posted by J Scott:
    Originally posted by Vikram C.:
    Do these 11 bags work?

    1
    2
    4
    7
    10
    20
    30
    60
    100
    100
    200

    I like it!!!

    Me too!

  • Sharad M.Pro Member
    Carlsbad, CA · Member since 2010 · 1k+ posts · 1k+ votes
    15y
    Originally posted by Financexaminer:
    Originally posted by J Scott:
    Originally posted by Vikram C.:
    Do these 11 bags work?

    1
    2
    4
    7
    10
    20
    30
    60
    100
    100
    200

    I like it!!!

    Me too!

    Jon answered it correctly in another thread where I posted this question. Jason had the correct answer initially when he said 10, but must have missed something when he tried to figure out how much money in each bag. Here's the right answer.
    http://www.biggerpockets.com/forums/56/topics/62758-a-maths-problem

  • Residential Real Estate Broker · Payson, AZ · Member since 2009 · 3k+ posts · 1k+ votes
    15y

    I don't care about getting hijacked. These conversations are for fun, no biggie.

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