You already know, math is probably the largest struggle for most people when they are trying to pass their real estate exam. But have no fear, the real estate exam ninja is here! Our online program ensures you pass your real estate exam the 1st try with our real estate practice questions, straight from the exam!
(If you are only interested in practice real estate math problems, skip to the bottom of the page)
How Is Math Used In Real Estate?
I’ll be honest here. If you are only wanting to become a real estate agent, you do not need a complex understanding of real estate math. HOWEVER, if your goals are set higher and you want to be a real estate investor, being able to do the math is the difference between you becoming rich and you losing everything. It’s that serious.
But as an agent, you really just need to know enough to pass your exams. That covers items such as
- Real Estate Math Formulas
- Percentages and Fractions
- Measurement Conversions
How Many Math Questions Are On The Real Estate Exam?
Every State is going to vary slightly, but you can bet your bottom dollar at least 10% of the real estate exam will be math centric. Some of our students have reported this number to be has high as 20% in rare cases. However, if you can master the simple material in our practice exams, you can rest assured you will score 100% on the math portion of the R.E. exam.
What Kind Of Math Questions Are On The Real Estate Exam?
- Loan To Value Ratios (LTV)
- Gross Rent Multiplier (GRM)
- Simple Interest Calculations
- Solving Percentage Problems
- Area measurements
- Volume measurements
- Calculating Square Footage
How Should You Prepare For The Math Portion Of The Exam?
To best prepare for the math portion of the real estate exam, pinpoint both your strengths and the areas needing focused study. While your primary aim is to clear the real estate licensing test, mastering every subject sets a strong foundation for a flourishing career in real estate.
Real Estate Math Practice Questions
Calculate the annual Gross Rent Multiplier (GRM) for a three-unit townhouse in Houston, TX, with a listing price of $450,000 and total annual rents of $30,000. Round your answer to two decimal places.
A. 15
B. 20
C. 14.5
D. 18
Answer – The Gross Rent Multiplier is used to assess the value of an investment property. To find the GRM, you use the formula: GRM = Property Price / Gross Annual Rental Income. The GRM does not factor in additional expenses such as utilities, insurance, or property taxes. In this scenario, the calculation is: 450,000 divided by 30,000, resulting in 15.
Determine the yearly Gross Rent Multiplier (GRM) for a six-unit condominium in Sacramento, CA, with a market price of $600,000 and gross annual rents of $40,000. Provide your answer rounded to the nearest hundredth.
A. 12.5
B. 18
C. 15
D. 55
Answer – The Gross Rent Multiplier helps determine an investment property’s worth. It is found using the equation: GRM = Property Price / Gross Annual Rental Income. It’s essential to remember that the GRM excludes various expenses like utilities, insurance, and property taxes. For this example, the calculation is: 600,000 divided by 40,000, which gives 15.
Real Estate Math Terms
- Gross Rent Multiplier (GRM): A ratio that shows the relationship between a property’s price and its gross rental income. It’s calculated as: GRM = Property Price / Gross Annual Rental Income.
- Amortization: Refers to the process of gradually paying off a loan over a set period through regular payments. An amortization schedule breaks down each payment between principal and interest.
- Loan-to-Value Ratio (LTV): Represents the amount of the mortgage lien as a percentage of the total appraised value of the property. It’s calculated as: LTV = Loan Amount / Appraised Value of Property.
- Cap Rate (Capitalization Rate): Measures the potential return on an investment property. It’s calculated as: Cap Rate = Net Operating Income / Property’s Purchase Price.
- Net Operating Income (NOI): Represents the total income a property generates after all operating expenses have been deducted, but before mortgage payments and taxes. It’s calculated as: NOI = Total Rental Income – Operating Expenses.
- Closing Costs: These are fees and other costs that have to be paid when finalizing a property sale, which might include things like loan origination fees, title insurance, and appraisal fees.
- Equity: Refers to the difference between a property’s market value and the remaining balance on its mortgage. Equity = Property’s Market Value – Remaining Mortgage Balance.
- Depreciation: For real estate, it refers to a reduction in the value of an asset over time due to wear and tear or obsolescence. It’s commonly used for tax purposes to spread out the cost of an asset over its useful life.
- Appreciation: The opposite of depreciation, appreciation refers to the increase in the value of a property over time.
- Points: In mortgage terms, a point represents 1% of the total mortgage amount. Points can be either “origination” (fees charged by the lender) or “discount” (used to lower the interest rate on a mortgage).
- Adjustable Rate Mortgage (ARM): A type of mortgage where the interest rate can change periodically, based on changes in a corresponding financial index.
- Fixed Rate Mortgage: A mortgage that has a set interest rate for the entire term of the loan.
Ending Thoughts
In conclusion, while the math section of the real estate exam might initially seem daunting, it’s truly an opportunity to sharpen your analytical skills and prepare for the practical scenarios you’ll encounter in your budding real estate career.
Remember, every challenge faced in preparation only strengthens your foundation in this industry. If you’re looking for a comprehensive guide to navigate these mathematical waters with confidence and proficiency, consider investing in our program.
Not only does it break down complex concepts into digestible lessons, but it also offers you the hands-on practice needed to tackle any math problem the exam throws your way. Here’s to your success and taking that next confident step in your real estate journey!
