Does Anyone know Real Estate Math?

Question

like the T-Bar method or any other easy way.I'm trying to pass the exam & the math has me stumped. Thanks

Answer 1

The T-bar method is a way to map cash flows to their respective time periods in order to calculate different variables in time value of money (TVM) situations.  Is that what you're talking about?

The key TVM variables are:

Present Value (PV) = the amount of money you start out with, or what dollars in the future are worth today

Payment = constant, even cash flows that occur in each Period

Number of Periods = the length of time in the calculation.  The Periods align with the frequency of the cash flows, and can be monthly, annually, daily, etc.

Interest rate = must be converted to align with Periods.  For example, if your cash flow periods are monthly at an annual rate of 12%, the monthly interest rate is 1%.

Future Value (FV) = a single lump sum that occurs at the end of the analysis.  It can be the amount that current dollars grow to, or a future cash event.

The t-bar for a 3 year cash flow would look like this:

Period..............Flow

0......................PV

1......................PMT

2......................PMT

3......................PMT + FV

By inputting the variables you do know into a financial calculator or Excel spreadsheet, you can solve for those you don't know.