A career in real estate requires you to master a mix of social dynamics and raw skills.
They go hand in hand since word of your business will spread when you have mastery over the information that matters.
Real estate math is a skill you can never brush up on too often.
There are formulas that will carry you far in your real estate career, no matter your area of focus.
Below we’ll explore some key formulas you’ll want to get a refresher on to always stay on top of your game.
Real Estate Math Tips
There are a few practical formulas you need to understand. These mathematical formulas are frequently used in the home sale process:
Figuring Out Precise Closing Costs
The closing costs refer to the final fees that pay for record searches, title checks, lawyer fees and other matters that make the home purchase go through.
Since these real estate services are a key point in the process, you need to be familiar with the formulas that calculate every part of closing.
For example, a real estate math formula that calculates every dime a prospective buyer should bring during closing time includes agent commissions, the number of closing costs paid by the seller, tax credits, and HOA fees.
Other closing cost related formulas are used to calculate the final buying price per square foot.
Learn Your Decimals
You’re in for some serious mistakes if you don’t get a grasp on decimals.
Improperly rounding your decimals up or down can create huge setbacks when it comes to a home sale. On a basic level, you need to round up if the number is 5 or greater and round down if the number is below 5.
Since you’re dealing in dollar amounts, you’ll need to become comfortable rounding to two decimal points. The quicker you’re able to do this, the easier it’ll be for you to comb through records and double check your real estate math.
Rent Cost Calculations
When you are buying a house to rent to multiple occupants, this calculation is crucial.
It can come in handy if you are planning to rent out a multifamily building, and should become familiar with this formula when calculating how much you’ll earn from tenants.
With this formula, you’ll be dividing the amount you’re taking in rent by the amount that you paid for the property.
This calculation will give you a percentage that reflects your rent/cost.
Knowing how to use this calculation helps you to figure out the rental value. When assessing your portfolio, this calculation helps you to rank the various properties you own in terms of this value.
Master Your Calculations
There are many real estate math formulas that an agent or seller should know.
The formulas you use the most will depend on the line of business you’re in. For instance, a real estate agent that rents out duplexes will need different formulas than an agent that handles foreclosures and short sales.
Real estate experts stress that the ability to explain your work to clients is essential for career success. Knowing these formulas keeps you ahead of the game in selling and renting real estate.
What must-have real estate formulas do you recommend? Let us know in the comments!