Mathematical Concepts
ration
- To prorate is to calculate proportionately.
- We prorate when we need to allocate or distribute amounts proportionally in relation to time, contribution, share or other factors.
Ex: Prorating service charges, rental payments etc….
A seller paid the annual service charges of AED 24,000 attributed to his unit on January 1, 2014, related to the year from January 1, 2014 to December 31, 2014.
The buyer agreed to reimburse the seller for the pre-paid service charges for the period from transfer date up to end of year; on pro-rata basis.
The transfer took place on June 1, 2014. How much should the buyer reimburse the seller for the pre-paid service charges?
a. AED 14,000.
b. AED 12,000.
c. AED 7,000.
d. AED 24,000.
Yield
- A yield is a measurement of expected or earned income on an investment. It is generally calculated annually as a percentage, based on the property’s (or investment’s) cost or market value.
- Yield = (income ÷ investment) × 100
Return On Investment (ROI)
- A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments.
ROI = (profit + income) ÷ investment × 100
ROI vs Yield
ROI is a measure of how much your bankroll increased during a specific period. For example, one month, one year or since the beginning. Yield doesn’t change depending on bankroll. ROI will typically increase/decrease over time, whereas yield will stay roughly the same.
Gross Income (GI)= All income generated from an investment before expenses/costs
Net Operating Income (NOI) = Income Minus Expenses
Expenses/Costs could include:
Vacancy allowance, Property Management fees, Insurance, Repairs costs, Service charge, Maintenance fees and etc…
GROSS YIELD
Gross yield is a percentage calculated as the annual income generated by an asset, divided by its price before deducting expenses.
For example:
Annual rent: 50,000
Purchase price: 1,000,000
Gross yield = (50,000 ÷ 1,000,000) × 100 = 5%
Knowing the gross yield gives you a very general idea of whether a particular property is a good investment – and gives a quick and easy way to compare different properties to each other.
But it’s not that helpful, because it doesn’t take costs into account. That’s where you need…
NET YIELD
Net yield is a percentage calculated as the net annual income (income minus costs) generated by an asset, divided by its price.
So:
Annual rent: 50,000
Annual expenses: 10,000
Net annual Income= 40,000
Purchase price: 1,000,000
Net yield = (50,000 − 10,000) ÷ 1,000,000 x 100 = 4%
Net yield is more accurate than gross yield, because it’s based on the actual amount of money you’ll end up with after costs.
Gross ROI is annual income from the property plus the realized gain/loss
(Before expenses) divided by the value of the investment.
Net ROI is NET annual income from the property plus the realized gain/loss (after deducting expenses) divided by the value of the investment.
Example:
Annual rent: 50,000
Annual costs: 10,000
Net income: 40,000
Purchase price: 1,000,000
Sales price: 1,100,000
Therefore, Gross Return on Investment = (100,000 + 50,000) / 1,000,000 = 15%
Net Return on Investment = (100,000 + 40,000) / 1,000,000 = 14%
YIELD Calculation Example
You are managing an apartment of 2,000 sq. ft. You have determined that you can achieve rental receipts of AED 240,000 per annum if the occupancy rate is 100%, however you predict the apartment being vacant for 1 month of the year to allow you to carry out some important Maintenance which will cost AED 10,000.
You will also pay service charges of 10 AED per sq. ft. and you expect Marketing and Leasing costs will amount to AED 10,000.
The owner paid AED 3,000,000 for the apartment. What will be his estimated Net Yield for the year?
a. 5%
b. 6%
c. 6.67%
Yield Calculation Example
A Property achieving net income of AED 1,500,000 annually, if you know that the Yield prevailing in the Property market is 6%, the approximate capital value of the Property shall be equal to:
- 90,000
- 25,000,000
- 20,000,000
Broker A, B,C has participated in selling land of an area 100m X 70m with commission ratio 5 to 3 to 2 respectively, if the property is sold for AED 5,000 per square meter and the brokerage commission is 4%, what would be the commission of broker A in AED?
- 420,000
- 280,000
- 700,000
- 140,000
Broker A, B,C has participated in selling land of an area 100m X 70m with commission ratio 50/30/20 percent respectively, if the property is sold for AED 5,000 per square meter and the brokerage commission is 4%, what would be the commission of broker C less than commission of broker B in AED?
- 700,000
- 280,000
- 420,000
- 140,000
What is the property value of a villa if Dubai Land Department property registration fee is AED 40,000?
- AED 2,000,000
- AEd 1,600
- AED 1,000,000
- AED 16,000
The management of a shopping mall charge mobile store owners an annual rent of AED 100 per square foot of storage area in addition to 4.5% of the gross business sales in excess of AED 400,000. If the dimensions of the store are 60′ x 120′ and the owner sells AED 2,000,000 worth of goods during the year, what is the total rent amount in AED for 3 years considering same sales amount is achieved?
- AED 2,376,000
- AED 2,430,000
- AED 2,214,000
- AED 231,000
Owner accepts to pay a 5% commission as long as he nets AED 1,000,000 on the sale of his house. What would be the minimum listing price in AED?
- AED 1,050,000
- AED 1,036,000
- AED 1,040,400
- AED 1,052,632
A property owner wants to receive AED 500,000 after paying a real estate broker commission of 8%. At what price should the broker sell the property in AED?
- AED 842,105.26
- AED 555,555.56
- AED 543,478.26
What is annual service charge of unit has suite area= 1500 sqft, balcony area = 200 sqft, where service charge rate is AED 15 per sqft.
Note: balcony area subjected for service charge is 25%.
- AED 5,812.5
- AED 25,500
- AED 23,250
- AED 6,375
What is the quarterly service charge of unit has suite area= 1500 sqft, balcony area = 200 sqft, where service charge rate is AED 15 per sqft. Note: balcony area subjected for service charge is 25%.
- AED 5,812.5
- AED 25,500
- AED 23,250
- AED 6,375
What is the registration fee for selling a warehouse with a base land area of 800 sqm in Dubai Land Department?
- AED8,000
- b. AED 10,000
- None of the above
If portal A is listing property with MLS /ad permit number 7116052600 and portal B is listing property with MLS/ad permit number 7116052613, what is the relationship between the properties on portals A and B?
- Same property
- Different properties
Jasim wants to purchase a townhouse worth AED 4,500,000 with financing from a bank. The bank requires a 20% down payment to be paid on the value of the townhouse. What will be the amount financed by the bank in AED?
- AED 900,000
- AED 3,600,000
- AED 4,500,000
Jasim wants to purchase a townhouse worth AED 4,500,000 with financing from a bank. The bank requires a 20% down payment to be paid on the value of the townhouse. HOW MUCH SHOULD HIS DOWN PAYMENT BE?
- AED 900,000
- AED 3,600,000
- AED 4,500,000
What Is the total brokerage fee when selling property for AED 2,250,600.00 through two brokers each having 2.5% commission of total property value?
- AED 112,500
b. AED 112,530.00
c. AED 56,265.00
d. AED 56,250
Jasim buys a villa for AED 4,600,000. Five years later, he sells the villa for AED 5,450,000 and pays brokerage commission of 4% of the selling price. What is the brokerage fees in AED?
- AED 218,000
b. AED 28,100
c. AED 21,800
If the selling price of a property as indicated on Form F is AED 1,750,000, what will be the transfer fee?
- AED 35,000 payable from the seller to the real estate developer via a manager check and AED 35,000 payable
by the buyer to the real estate developer via a manager cheque.
- AED 70,000 payable to the Dubai Land Department via a manager check.
- AED 70,000 payable from Buyer to Seller by manager check.
What is the Dubai municipality housing fee applied to freehold property that is not leased?
- 5% from the property value
b. 0.5% from the property value
c. 5% from the rental index average amount