Answers
Real estate business math, answered.
Plain answers to the calculations agents, teams and investors ask about most: commission after a cap, how many closings a goal takes, months of inventory, team splits and rental returns. Each one is worked through with labelled sample figures and the same formulas the Market X Consulting instruments use.
How do real estate agents calculate net commission after a brokerage cap?
Net commission after a cap is your gross commission minus any referral fee, minus the brokerage’s share until your annual cap is paid, minus royalty and per-transaction fees. Once the cap is reached, the brokerage share stops for the rest of the cap year and only the fixed fees remain.
How many homes does a real estate agent need to sell to make $100,000?
Work backward: add a tax set-aside and your business expenses to the $100,000, then divide by what one closing leaves you after split, cap and fees. With the sample figures on this page, a $100,000 take-home goal needs 20 closings; your own price, commission and split will give a different number.
Worked in: Instrument No. 01, the Agent Business Plan & GCI Model
How do you calculate months of inventory in real estate?
Months of inventory is the number of active listings at the end of a month divided by the number of closed sales in that month. It estimates how long the homes for sale would last at the current sales pace if no new listings came on the market.
Worked in: Instrument No. 03, the Market Report Kit
How do real estate team commission splits work?
On a real estate team, the brokerage takes its share of each deal, and the team and the agent divide the commission under the team agreement, often with a lower agent split on leads the team paid for than on leads the agent found. The split is figured either on gross commission or after the brokerage share.
Worked in: Instrument No. 04, the Team Recruiting & Compensation Plan Modeler
How do you calculate cash-on-cash return on a rental property?
Cash-on-cash return is a rental’s annual cash flow after the mortgage, divided by the total cash you put in: the down payment, closing costs and any make-ready work. Annual cash flow is the property’s net operating income minus a year of loan payments.
How these answers are made: each page is written by the Market X Consulting Editorial Team from the formulas inside the matching instrument. Every number on the page is a sample chosen to show the arithmetic and is calculated from the inputs it states; none is a market figure, a benchmark or a result. Pages show the date they last changed.
These answers and the instruments are planning and analysis tools. They are not legal, tax, accounting, financial or appraisal advice, and they do not promise or imply any income or result. Every example figure is a sample chosen to show the arithmetic, not a benchmark, a market figure or an expectation.