A good understanding of math principles is a valuable asset in most businesses today.
Nowhere is it more important than in the Real Estate business world.
Whether you are an experienced investor, a novice first-time home buyer, or a Real estate professional, you will need to apply the basics of math at some time during each and every day of your life.
If you have purchased a lot and need to determine the cost to fence that lot, you will need to know some facts about the property.
For example, you will need to know the dimensions of the lot and the cost of fencing per linear foot.
If the lot is 250 feet wide and 125 feet deep, then the perimeter of the lot is 250 feet + 250 feet + 125 feet + 125 feet = 750 Linear/Running Feet.
If the fencing material plus labor costs $7.
50 per foot, then the cost for the entire fence is 750 Linear/Running Feet X $7.
50 = $5,625.
00.
There are some very general conditions that govern whether you will qualify for a mortgage loan, among them being your income to mortgage expense ratio.
Loan officers will explain to their customers that their mortgage payment cannot exceed 28% of their monthly income.
More importantly, their mortgage payment may not exceed 36-42% of their total monthly expenses.
As an example, if you earn $4,000 per month from your job, your mortgage payment may not exceed ($4,000 X 28%) $1,120.
This mortgage expense in addition to your monthly credit bills (car payment, revolving credit cards, etc.
) may not exceed ($4,000 X 36-42%) $1,440 to $1,680 per month.
With this example, it is easy to see why so many homeowners find difficulty in keeping their homes today.
It has never been truer than today when saying that buying a home takes discipline and adherence to a strict budget.
Most investors as well as many homeowners are interested in how much their property has appreciated over a specific period of time.
For instance, if the investor purchased a lot six years ago for $18,000 and it has appreciated 5% per year, what is the property worth today? The answer is simple: 5% Appreciation per Year X 6 years = 30% Total Appreciation.
100% Original Cost + 30% Total Appreciation = 130% Today's Value.
$18,000 Original Cost X 130% or 1.
30 = $23,400 Today's Value.
Using basic math skills is very helpful in understanding how to determine maintenance and improvement costs to properties.
These skills are also important when attempting to understand mortgage payments, monthly expenses, and of we are lucky, appreciation and profitability.
As these examples are very rudimentary in scope, one should always seek advice from their accountant, loan officer, and of course their Real Estate Professional.