Real Estate Math

Real Estate Math – Your Primary Pre-Requisite

In order to become a real estate professional you are required to pass a number of exams. In order to pass these exams you must be competent in a number of basic math skills. Although, these skills are not advanced they are an absolute requirement.   Math skills are now synonomous with life skills. To be forewarned is to be forearmed! You may want to take immediate steps to improve your basic math skills in general and  begin to learn real estate math skills in particular.

Here is a library of real estate math skills which you will encounter in the the OREA real estate courses.

The basic skills that are required to pass the OREA program are – courtesy of Math Magic Toronto – Real Estate Math:

What Are The Specific Math Skills Required To Become A Real Estate Agent?

The Ontario Real Estate College (OREA) describes the personal skills needed to become a successful real estate agent. Not surprisingly they include:

“Math – basic fundamentals, including multiplication, division, fractions, and percentages”

This is hardly a surprise. In fact  “Course 1″  is quite “math heavy”. Your success or failure in course 1 will depend on your math skills. One of the four sections is called: “Introduction to Math Skills”.

Introduction To Math Skills is described by OREA as follows:

“… focusing on math and related skills required in a real estate career. Chapter 7 highlights basic calculation skills involving fractions, decimals and percentages including the use of a calculator followed by area, volume and building measurements. Chapter 8 concentrates on mortgage mathematics with particular emphasis on mortgage financing fundamentals including mortgage qualifications and interest rate calculations. The final chapter highlights calculations that arise at various points in the negotiating and closing processes including using capitalization rates, taxation (land transfer tax and real property tax) and adjustments made at closing.”

These real  estate math skills  establish the prerequisites  for the real estate and real estate  problem solving questions that appear in later courses. It is interesting that the basic concepts  of geometry (areas, volumes, etc.) are  included in your real estate math tool box. Knowledge of  the basic  concepts of  geometry is necessary to determine building area measurements.

Examples of Real Estate Math – Commercial  Real Estate – Math Skills Required

In addition, to the math covered in course 1,  passing the OREA commercial  real estate  exam requires you to know  (at  a minimum the following):

– calculation of minimum rents

– calculation of additional  rent

– calculation of percentage rents

– determining valuation and cap rates

– total  cost of building per square foot

– determining total return, return on equity, leverage and the determination of whether the leverage  is positive or  negative

– valuation with the direct capitalization method

– Calculation of depreciation (CCA), the undepreciated  capital  cost (UCC) and recapture

– income vs. capital gain

– and more

Examples of Real Estate Math – Mortgages – Skills Required

– Interest: effective, nominal

– Present and Future Value, term, amortization period, term, early discharge

– Bonus, discounting of mortgages, interest penalties, amortization, blended payments

– monthly payments, compounding frequencies, pre-payment, mortgage buy downs

Many people  have forgotten these skills or never had them to begin with. Either way our “Real Estate Math Prep” has been designed to:

First, teach the toolbox of math skills so that you can pass the exam; and

Second, ensure that you are able to apply these skills to solve problems on  your OREA real estate exams and in your real estate career!

Note that the OREA Real Estate College Admissions Test is based heavily on the math skills that are essential to do real estate math.

One thought on “Real Estate Math

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s