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Blessings,

Travis

35 Comments

  • Travis, How would you figure this out? “If an investor earns $360 on a straight note with an investment rate of 8% payable in 60 days, what is the pricincipal amount of the loan?” The formula provided in my book is over-complicating this and I am stumped. Great site – I’m going for my license & I have this site bookmarked! Thanks SO much for all the hard work, this is an Excellent site!

    • KA,

      Thank you very much for your question and I am really glad that you are finding this site useful. It made my day to hear that you bookmarked the site.

      I will try to answer your question below.

      First, Let me start with my assumptions. Assumptions are key to getting the right answer. So if I’m making the wrong assumptions for your question please let me know and I’ll repost.

      – the 8% is the annual interest rate
      – The $360 will be earned in 60 days
      – The note is for only 60 days
      – We will be using the baker calendar of 360/year

      I’ll explain it in detail first then I’ll summarize afterwards to show you that it’s not too many steps.

      First, we need to figure out what the annual interest amount would be:

      $360 is earned in each 60 day period. So 360 days per year (remember banker’s calendar) divided by 60 day periods = 6 periods.

      Or said another way, 360 days / 60 days = 6 times a year a 60 day note becomes payable

      So now we take the $360 earned for every 60 days and multiply by 6 periods:

      $360 x 6 periods = $2,160 annual interest earned at 8%

      Next we divide $2,160 by 8% to get the answer:

      $2,160 / 0.08 = $27,000 as the total principle amount of the loan.

      To Summarize:

      $360 x 6 periods = $2,160 for full year of interest

      (We know that 60 days = 2 months. So 12 months / 2 months = 6 periods)

      $2,160 / 0.08 = $27,000 principle amount of loan.

      I hope this helps and I wish you the best of luck with your exam. Also, please keep me informed of your progress with the exam.

      Blessings,

      Travis

  • Travis, i am glad i found this site, I have book marked it too, wonderful answers and more. I have taken the state portion of the washington state exam and now have to take the national portion, last test i failed on the math section. i am studying prorations and find this answer to the following question confusing, the question ” For a closing on sept 18, that is the amount of prorated rent the seller owe the buyer for a garage apt. that rents for 465 per month ? the rent was paid on sept 1 and the tenant has paid 300 security they say the way to compute this is ,, 465 divided by 30 x 12 and get 186. I do not understand this computation, i get the 465 / 30 but what the 12

    • Hey Ron,
      Thanks for your comment and questions. Let me see if I can help answer it for you. The quick answer is that 12 days is based on 30 days of the month minus 18 days the seller owns the home (30-18=12).
      Now for the longer explanation:
      When I start to do a proration example is works best for me to lay out both sides of the transaction. That way, I can go back and answer any question that may be asked and double check my math. So in your example:
      The seller has already been paid for the month ($465). Now he/she owes the buyer for the time remaining in September that they own the garage apartment. The seller will own it the first 18 days in the month and the buyer will own it the remaining 12 days (as described above: 30-18=12). So now we can calculate the following:
      Daily Rate is $465 / 30 days = $15.50
      Seller’s portion of rent is $15.50 daily rate x 18 days = $279
      Buyer’s portion of rent is $15.50 daily rate x 12 days = $186
      Just as a check we can add $279 (seller’s portion) + $186 (buyer’s portion) = $465 and now we can answer any question they throw at us!

      Yes, it’s extra work but it pays off in the long run to make sure your answer is right.

      Hope that helps and please keep in touch.
      Blessings,
      Travis

  • Would like to know how to work this problem: a lease calls for $1,000 per month minimum plus 2 percent of annual sales inexcess of $100,000. What is the annual rent if the annual sales were $150,000?

    • Thanks for the question. This is how I would calculate it:

      $1,000 x 12 = $12,000 minimum annual rent
      $150,000 – $100,000 = $50,000 sales that is impacted by % rent
      $50,000 x 2% = $1,000 % rent calculation
      $12,000 + $1,000 = $13,000 annual rent

      Please let me know if you get a different answer.

      Thanks,

      Travis

  • Hi Travis,
    I just bookmarked your site as well. Thank you very much for all the information in this site. I start RE school on Tuesday. I was an accountant for 11 years and an Interior Designer for the past 30 years, thus, I’ve been an entrepreneur for most of my working life. I was a bit worried about math calculations for RE, thinking there was something I really needed to learn. I am eternally grateful for my accounting background and by finding this site, I have realized the math portion should not be a problem for me.
    I have thought about getting my license in the past, so finally I am taking this exciting step.
    Again, thank you for reaching out with all this important information.

    • Lynne,

      Thanks for reaching out and I wish you the best of luck with real estate school. Please keep in touch and let me know how things are going.

      Blessing,

      Travis

    • Hello Janine,
      Absolutely! That would be great. Any particular topics you have in mind? Please feel free to email me here. I look forward to hearing from you soon.
      Blessings,
      Travis

  • hi, i recently purchased your book. i believe you’ve listed some incorrect answers on pages 64 and 65. can you confirm this? thanks

    • Hello Pat,

      First, let me thank you for purchasing my book! What questions in particular are you referring to and I’ll be glad to walk through them with you?

      Blessings,

      Travis

  • I’d suggest the book needs to address some of the calculations that are on the new forms (Closing Disclosure and Loan Estimate). APR and Total Interest Paid are numbers that seem to confuse people. I know that for the company I work for, their loans are very simple and as far as I can tell, APR is just the nominal interest rate. (no points and the fees near zero)

    • Bill,

      Thank you very much for the suggestion. I am considering adding a few more topics to the book and will definitely expand more on financing and closing to include the new closing documents. Please let me know how you like the book. I’d love to get some feedback as I prepare for an update.

      Blessings,

      Travis

  • An owner lists her home at a 7% commission rate and wants to net $45,000 after paying the mortgage balance of $68,000 and the broker’s commission. To the nearest dollar, what should the selling price be to net her $45,000?  
    Show me the math.
    The correct answer $121,505.
    FYI I took the mortgage balance plus the desired net amount multiplying the sum by 1.07 (itself plus the commission). It evidently does not work that way.

    • Hello Dwight,
      Here is how you get to your answer. Sounds like you were close but instead of multiplying by 1.07, you should have divided by 93%. See example below:

      $68,000 + $45,000 = $113,000 then you divide $113,000 by 93% (which is 100% minus the commission of 75) and that gets you $121,505.

      Let me know if you have any more questions.

      Blessings,

      Travis

  • in your example of proration, you use only 360 days in the calendar year, how do you explain the extra cost that will be incurred by the consumer for not using 365.25 and an adjustment of 5.25 days of fees owed.

    • Hello Duff,
      I use the banker’s calendar to keep things simple for the examples. Some states use 365 days and others use the banker’s calendar (360 days). I’m curious, does your state use 365.25 days when calculating proration? If so, what state are you living in. I’d love to learn more about that.

      Blessings,

      Travis

    • Hello Tim, where in particular are you referring? All examples should have the answers. If I missed something I will be glad to add the answer.

      Blessings,

      Travis

      • I’m borrowing $185,000 for a home and this amount represents 95% of the purchase price. What am I paying for my home?

        I was wondering how to set this up? I set it up the way I thought it would be set up but the math just isn’t going well.

        When I double check the math it’s like $184,537.50 instead of $185,000 flat

        • Hey Tim,
          To calculate the loan to value take $185,000 x 95% = $175,750. If you want to double check yourself then you need to take $185,000 / 95%. Do NOT try and take 5% of you answer double check your math. That is incorrect and will leave you short. You can take 5% of the $185,000 and subtract it from the $185,000 and you should get the same answer. Hope that helps!

          Blessings,

          Travis

  • Hi I am in dire need of assistance on Real Estate Math….BUT will this work for Canadian Real Estate….If not this won’t help me at all.

    • Hello Jerry,

      I’m not familiar at all with Canadian real estate. Please look at the examples on this site and if you have any specific questions I will be glad to help as I am able. I’m my opinion, the math shouldn’t change but the starting assumptions may be different (i.e. Banker’s calendar, day of closing belonging to seller, etc.).

      I’d love to know of any differences that you find and wish you the best of luck.

      Blessings,

      Travis

  • Travis, you must have left teaching to be in real estate! Thank you so much for your clear, FREE help! I actually take the test tomorrow and wish I had found your site sooner. You are so generous to share. I stupidly paid $125 to a company in Florida (My Real Estate Tutor) for their “database” of questions that has proved an 85% passing rate for all who purchase. I now know it’s a scam. Their database is 450 questions and some of the answers are wrong and questions had misspellings and bad grammar. Someone hastily put together some questions and then charged people way too much for very little. Anyway, from a single mom, ex-teacher, THANK YOU SO MUCH for generously sharing your knowledge so succinctly and correctly!! I will recommend your eBook to all my friends who have declared they are following in my footsteps and leaving a noble profession (teaching) so they can actually make ends meet in the real estate world!

    • Mary Jane, thank you so much for your comment! First of all, I will say a prayer that you pass your exam tomorrow with flying colors! Please let me know how you do.

      I have never been a teacher and you’re right – it is a very noble profession indeed! I’m glad I can help and please let me know how else I can better this site to help new agents. Math seems to be the most popular subject but I’d like to also branch out into other areas as well. Any ideas will be greatly appreciated. Best of luck to you and your new career.

      Blessings,

      Travis

  • Before I purchase this book, please assure me that it doesn’t present the math in terms of algebraic equations.
    I’ve been trying to study from another book I purchased through Amazon.com and I am totally lost due to all the algebra knowledge needed to understand what I’m doing. I haven’t been in touch with Algebra since high school, in the late 70’s, and wasn’t even good at it then. I passed the real estate exam in Nevada about 25 years ago, so “I know” I’m capable of learning the material, but it must be presented to me in a manner that makes sense to me. I plan to take a pre-licensure course in Missouri next month, and want to get a head start on the math. Thank you for your assistance with this.

    • Hello Mary,
      Thanks for your question. I wrote the book to feel like a friend tutoring another friend and I tried to break it down to simple steps (so no algebra). Please take a look at my math examples on the site. They are very similar to the book. If you have any questions just let me know and I will help as I can.

      Blessings,

      Travis

      • Thank you, Travis! I’ll go ahead and purchase the book and start studying it. Without algebra to add to my confusion, I just might master the math. I’ll stay in touch with feedback. Thank you for your fast response!

  • Hello, I was looking at your prorating taxes practice examples. I don’t quite understand the banker calendar, but did I miss something else on that page? problem#8 June 30= 180 days # 7 July 7 =187 days #10 Aug 14= 136 and #9 Nov 17=43 days. does the calendar year run Jan-Jan or is it different?

    • Hello Lynda – I will be glad to help you with calculating the number of days.
      #7. July 7th – seller side is calculated by first seeing that Jan – Jun is 6 months. So 6 x 30 = 180 days plus the 7 days in July = 187 days (remember my assumption is that seller owns the day of closing, your state may be different).
      #8. June 30th, seller side is Jan – Jun = 6 months x 30 days = 180 days.
      #9. November 17th, Buyer side is 30 – 17 = 13 days in November plus the remaining 30 days in December or 13 + 30 = 43
      #10. August 14th, Buyer side is 30 – 14 = 16 days in August plus Sep – Dec is 4 months x 30 days = 120. 120 + 16 = 136.

      Does that help? With the banker’s calendar every month gets 30 days so it makes it much easier. Please let me know if you have any more questions.

      Blessings,

      Travis

    • Hello Jackie, it is an eBook so you will receive the link to download within minutes after you order. Please let me know if you have any questions as you go through it. Blessings, Travis

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