BC Real Estate Trading Services Course Real Estate Math and Calculations 1

Question 1

A commercial property generates a net operating income (NOI) of $48,000 per year and sells for $600,000. What is the capitalization rate?

Accepted Answer

8.0%

Answer

Cap rate = NOI ÷ Purchase Price = $48,000 ÷ $600,000 = 0.08 = 8%. The capitalization rate expresses the relationship between annual net income and property value.

Question 2

A commercial lender offers a maximum loan-to-value (LTV) ratio of 75% on a property appraised at $840,000. What is the maximum mortgage amount the lender will provide?

Accepted Answer

$630,000

Answer

Maximum mortgage = LTV ratio × Appraised value = 75% × $840,000 = $630,000. The remaining 25% ($210,000) must be covered by the borrower's equity or down payment.

Question 3

A listing brokerage and cooperating brokerage agree to split a 4% commission equally on a sale price of $720,000. The cooperating brokerage pays their agent 55% of the cooperating side. How much does the cooperating agent earn?

Accepted Answer

$7,920

Answer

Total commission = $720,000 × 4% = $28,800. Each brokerage receives $14,400. The cooperating agent earns 55% × $14,400 = $7,920.

Question 4

A rental property has gross annual rental income of $72,000. Vacancy and credit losses are estimated at 5% and annual operating expenses total $22,000. What is the net operating income (NOI)?

Accepted Answer

$46,400

Answer

Effective Gross Income = $72,000 × (1 − 0.05) = $68,400. NOI = $68,400 − $22,000 = $46,400. NOI is calculated after vacancy losses and operating expenses, but before debt service.

Question 5

A home with 2,200 square feet of finished living area sells for $880,000. What is the price per square foot?

Accepted Answer

$400

Answer

Price per square foot = Sale Price ÷ Square Footage = $880,000 ÷ 2,200 = $400 per square foot. This metric is commonly used to compare property values within a neighbourhood.

BC Real Estate Practice Test

BC Real Estate Practice Test

BC Real Estate Trading Services Course Real Estate Math and Calculations 1