REAL ESTATE MATHEMATICS

SAMPLE PROBLEMS ( REF: 0505) w/ solution

I. PERIMETER FENCING PROBLEM
1.

A perimeter wall will be constructed on a 240 sqm. regular lot having a frontage of 12
meters. The wall is one meter below and 4 meters above ground. If cost is P900.00 per
sqm. compute the total cost of the wall excluding a 3 meter wide gate.
Solution:
Lot area
Frontage
Depth
Height of fence
Perimeter of Lot
Wall perimeter
Cost of Fencing

2.

= 240 sqms.
= 12 m
= 240sqms./12m = 20 m
=4m
= 12m + 12m + 20 m + 20m = 64 m
= 64 m minus 3m (gate) = 61 m
= 61m x 5m x P900/sqm.
= P 274,500.00

Mr. Castro owns a 540 sqm. rectangular lot with a 16 meter frontage. He wanted to
enclose it with a fence made of hollow blocks, 2.5 meters high above the ground with 1.0
meter below the ground. The fence cost P650.00 per square meter. How much will the
fencing cost if a 4 meter wide steel gate costing P45,500.00 is installed.( 5 pts.)
Solution :
Compute for the width of the fence

Height of Fence

Perimeter

Fence

Cost
Plus (Gate)
Total Cost

=
=
=
=
=
=
=
=
=

=
=
=
=
=

Area divided by length (Area / L = Width)

240 sqms. / 12 m.
20 m.
1.7 m (above ground) + 0.3 m.(below ground)
2.0 m

2L + 2W
2 (12 m.) + 2 (20 m.)
64 m.
Total length - gate
64 m. - 4m
60 m.
60m x 2m x P250.00/sqm.
P 30,000.00
+ 7,500.00
P 37,500.00

II. MACEDA LAW

3.

Mr. Cruz bought a 200 sqm. subdivision lot at P3,000.00/sqm. He paid 25%
downpayment the balance payable in 120 equal amortizations at 21% interest per
annum. He has paid 84 monthly amortizations and paid penalty interest of P32,000.00.
Compute for his cash surrender value under the Maceda Law.
Solution:
Buyer has paid 7 years ( 84 mos. divided by 12 mos./year) and is therefore entitled to
sixty percent (60%) refund

Real Estate Mathematics

Refund is based on total payments made which includes down payment plus amortization
interest but exclusive of penalty interest.
Downpayment: 200 sqm. x P3,000.00/sqm. x 25%
Amortization (P737,612.20 - P32,000.00)
Basis of Refund
Percentage of Refund (50% + (5%x 2 yrs))
Amount of Refund

=
=
=
=
=

P 150,000.00
P 705,612.20
P 855,612.20
60%
P 513,367.32

III. TAXATION
4.

In a sale of condominium unit, the following information were gathered:

Value per Deed of Sale
Zonal Value of Condominium Unit
Market Value of Condominium Unit
Assessor Value of land where the
Condominium unit is built
Zonal value land where condominium
Project is built
Floor area of the condominium unit sold

P3,000,000.00
P22,500.00/sqm.
P1,500,000.00
P2,500.00/sqm.
P5,000.00/sqm.
150 sqm.

Compute for the capital gains tax on the above transaction.

Solution:
In the sale of condominium unit, tax base is only the price or unit zonal value whichever is
higher. Value per deed of sale is P3,000,000.00 while unit zonal value is P3,375,000.00
(P22,500 x 150 sqms.). Therefore, the tax base is P3,375,000.00
Capital gains tax =

5.

P 3,375,000,00 x 6%

= P 202,500.00

An 800 sqm. lot with a house was sold for P3,500,000.00. Per tax declaration, the market
value of the house is P1.5 M and lot is P1.6M. The zonal value of the lot is
P3,500.00/sqm. The sale is subject to capital gains tax.
a. Compute the tax base
b. How much is the capital gains tax
c. How much is the documentary stamps
Solution:
a) Basis of CGT is whichever is higher between 1) price per deed of sale or 2) lot zonal
value plus improvement value
Improvement value is whichever is higher between 1) price - lot zonal or 2A)A
improvement value per latest of tax declaration.
Price per deed of sale (house and lot)

= P 3,500,000.00

Lot zonal value 800 sqm. x P3,500.00

= P 2,800,000.00

Plus Improvement Value

Price-lot-zonal: P3,500,000 - P2,800,000.00

= P700,000.00

Improvement value per tax declaration

So, improvement value per tax declaration
Real Estate Mathematics

= P 1,500,000.00

Is higher, so use P1,500,000.00

Total basis of CGT
Lot Zonal Value
Plus: Improvement
Total basis of CGT

= P 2,800,000.00
+ P 1,500,000.00
= P 4,300,000.00

b) Capital gains tax = P 4,300,000.00 x 6%

=P

258,000.00

=P

64,500.00

c) Documentary Stamps Tax

= P 4,300,000.00 x 1.5%

6.

A CREBA-registered developer is selling a house and lot package at P950,000.00 per

unit.
a. Compute the expanded withholding tax and documentary stamps
b. How much is the value added tax?
Solution:
a)

b)

7.

Withholding Tax
Documentary Stamp Tax:

:
:

P 975,000.00 x 3.0%
P 975,000.00 x 1.5%

= P 28,500.00
= P 14,250.00

The sale is not subject to VAT because it is a sale by dealer of residential dwelling
where the price does not exceed P1,500,000.00 (As per BIR RR 1-2005)

A corporation is the lessor of a 7-door residential apartment with a monthly rental as

follows: 3 doors at P8,000.00 each and 4 doors at P10,000.00 each. It incurred
P20,000.00 worth of VAT-invoiced expenses for repair and maintenance for January,
1998. Compute the VAT payable for the month of January 1998.
Solution:
3 doors at P8,000.00 x 12 months
4 doors at P10,000.00 x 12 months
Annual Gross Income

=
=
=

P 288,000.00 (exempt)
480,000.00
P 768,000.00

Considering that the annual gross receipts exceed P 550,00.00. The units with monthly
rental of P10,000.00 are vatable.
January output tax =
January input tax =

P 10,000.00 x 4 units x 1/11

P20,000.00 x (P480,000.00) x 1/11
768,000.00
VAT payable for January

=
=

P 3,636.36
P 1,136.36

P2,500.00

NOTE: Under the new RR 1-2005, residential units with monthly rent up to P10,000.00
are already VAT exempt

8.

Mr. Tan bought a subdivision lot for P500,000.00. He paid a 20% downpayment, balance
payable in 5 years at 21% interest per annum. The lot was contracted in December 1994
and his monthly amortization starting January, 1995 is P10,820.00. E-VAT was
implemented effective January, 1996.
a. Is his payment starting January 1996 subject to EVAT? Why?
b. How much is the total monthly amortization as of May 1996?

Real Estate Mathematics

Solution:
a) The sale is on installment basis because the initial payment in the year of sale (1994)
did not exceed 25% of the price. Therefore, installments beginning January 1996 are
subject to E-VAT
b) Amortization in 1995
P 10,820.00 x 12 mos.
Amortization in 1996 (Jan-May)
P 10,820.00 x 5 mos. X 1.1
Amortization as of May 1996

P 129,840.00

=
=

P 59,510.00
P 189,350.00

NOTE : The above applies to the EVAT law then in effect and has been revised by BIR
Revenue Regulations No. R 1-2005 and where sale of residential house and lots below
P1,500,000.00 are no longer subject to VAT.

9.

Gross sales receipts of a VAT-registered developer for 1996 were P1,100,000.00 for
January; P1,850,000.00 for February; and P880,000.00 for March. Purchases from VATregistered suppliers were P660,000.00 for January; P770,000.00 for February; and
P550,000.00 for March. Compute for the a) Output Tax; b) Input Tax; VAT payable for
the months of January, February and March.
Solution:
a) Output Tax
January =
February=
March =

P 1,100,000.00 x 1/11
P 1,650,000.00 x 1/11
P 880,000.00 x 1/11

=
=
=

P 100,000.00
P 150,000.00
P 80,000.00

P 660,000.00 x 1/11
P 770,000.00 x 1/11
P 550,000.00 x 1/11

=
=
=

P 60,000.00
P 70,000.00
P 50,000.00

P 100,000.00 - 60,000.00
P 150,000.00 - 70,000.00
P 80,000.00 - 50,000.00

=
=
=

P 40,000.00
P 80,000.00
P 30,000.00

b) Input Tax
January =
February=
March =
c) EVAT payable
January =
February=
March =

10. A CREBA-registered developer offers three house and lot packages as follows: a)
P450,000.00 per unit in Cabanatuan City; b) P900,000.00 per unit in Sta. Rosa, Laguna;
and c) P2,00,000.00 per unit in Quezon City. Compute the expanded withholding tax for
each package.
Solution:
a)
b)
c)

Withholding tax =
Withholding tax =
Withholding tax =

P 450,000.00 x 1.5%
P 900,000.00 x 3.0%
P 2,100,000.00 x 5.0%

=
=
=

P 6,750.00
P 27,000.00
P 105,000.00

11. Mr.Timbol sold his property for P1,800,000.00 with a downpayment of P1,200,000.00 and
the balance which was secured by a mortgage in the same property is payable in one
year. Compute the Documentary Stamp Tax in order to register the transaction. (5%)

Real Estate Mathematics

Solution:
Documentary Stamp Tax on Sale

: P 1,800,000.00 x 1.5% = P 27.000

Documentary Stamp Tax on Mortgage

1st P5,000.00
Every P5,000.00 in excess of P5,000.00

=
=

P 20.00

P 10.00

Amount of Mortgage : P 1,200,000.00

1st P5,000.00
P5,000.00-P 1,200,000.00 (P10/P5,000)
=
Total documentary stamp tax
On mortgage

=
P 2,390.00
=

20.00

P 2,410.00

IV. SELLING PRICE/BROKER'S COMMISSION

12. Mr. Samson hired the services of a broker to sell his property. The owner said he bought
it at P6,300,000.00 and wants a 30% gross profit. If you were a broker, at how much
would you sell the property? If you will be paid 5% commission, how much shall be
added to the selling price that the 30% profit of Mr. Samson will not be affected?
Solution:
a) Selling Price =

P 6,300,000.00 + 30% (P6,300.00)

b) Selling price incl. commission

= P 8,190,000.00 = P 8,190,000.00
100% - 5%
95%

P 8,190.000.00

P 8,621,025.63

13. A real estate broker has a listing where the seller agreed to should capital gains tax and
broker's 5% commission. At how much should the broker sell the property in order that
the seller will realize a net proceed of P4,895,000.00?
Solution:
Seller's expense =
Selling price =

6% (CGT) + 5% (Commission) = 11%

Net to Seller
= P 4,895.000
(100% - Expenses) (100% - 11%= 0.89)

= P 5,500,000.00

14. At how much should Adora sell her property acquired at P6,300,000.00 is she desires a
30% gross profit rate?
Solution:
Selling price = Acquisition Cost = P 6,300,000.00
(100% - 30%)
70%

P 9,000,000.00

15. Ms. Cruz, a licensed real estate broker obtained a net listing of P6,500,000.00. She sold
the property at a price which is inclusive of her 5% commission, capital gains tax and
documentary stamps. The Deed of Sale provides that the buyer will pay for the transfer
and registration fees. At how much was it sold?

Real Estate Mathematics

Solution:
Given

SP

SP

Net Price to Owner

Commission
Capital Gains Tax
Doc. Stamps

P 6,500,000.00
(100% - 5% - 6% - 1.5%)

=
=
=
=

P6,500,000.00
5.0% of Selling Price
6.0% of Selling Price
1.5% of Selling Price

= P 6,500,000.00
0.875

P7,428.571.4

V. DEVELOPMENT COSTINGS
16. A corporation bought 50 hectares of land for P700.00/sqm. If high-end development
costs P1,000.00/sqm. based on saleable area which is 60% of the gross area, compute
the following:
a.
b.
c.
d.

Total land acquisition cost

Total development cost
Total unit cost per sqm. of the saleable lots
If the projected gross mark up is 100% of the total unit cost/sqm. of saleable lots,
what will be the selling price per sqm.

Solution:
a) Land Acquisition Cost

b) Development Cost

c) Lot Unit Cost

=
=

50 HA x 10,000 sqm/ha. X P700.00

P 350,000,000.00

=
=

500,000 sqm. x 60% x P1,000.00

P 300,000,000.00

=
=

d) Selling Price/sqm.

=
=

(P 350M + 300M)
500,000 sqms.x60%
P 2,166.67
P 2,166.67 + P 2,166.67 (100%)
P 4,333.34

17. A broker, before offering to his client a hectare land for low-cost housing, prepared a
simple profitably statement. The estimated development cost is P300/sqm. based on the
gross area. Construction cost of the 100 housing units is P3,000.00/sqm. with each unit
having a floor area of 60 sqm. The land is being offered at P300/sqm. and the selling
price per housing unit is P450,000.00. how much is his gross profit?
Solution:
Sales Income : 100 units x P450,000.00
Less: Land: 10,000 sqm. x P300
= P 3,000,000.00
Dev: 10,000 sqms. x P300
= P 3,000,000.00
Houses: 100 units x 60 sqm x P3T
= P 18,000,000.00

P 45,000,000.00

P 24,000,000.00

Gross Profit:

P 21,000,000.00

18. A corporation is developing a 10-hectare rawland purchased at P400.00 per sq.m.

Development cost is estimated at P300.00 per sq.m. based on the gross area. Marketing
inclusive of advertising and broker's commission is 15% of selling price. If the company
Real Estate Mathematics

desires a gross profit of 30% of selling price, what would be the minimum selling price per
sqm. of the subdivision lots assuming that saleable area is 70% of gross area. ( 5 pts.)
Solution:
Total development cost
(Based on gross area)

=
=

P 400.00/sqm. + P300.00/sqm.
P 700.00/sqm.

Total cost

=
=

P 700.00/sqm. x 100,000 sqms.

P 70,000,000.00

Saleable Area (70%)

=
=

100,000 sqms. x 70%

70,000.00 sqms.

Cost per square meter

P 70,000,000.00
70,000 sqms.
P 1,000.00/ sqm.

=
Minimum Selling Price

=
=
=

Cost per square meter

( 100 - (30% + 15%)
P 1,000.00
( 0.55)
P 1,818.18 per square meter

VI. AMORTIZATIONS/ INTEREST/ INSTALLMENT

19. Jose bought a 1,060 sqm. lot at P1,400.00 sqm. on installment basis with 50%
downpayment and the balance payable in 5 years at 21% interest per annum. After 3
regular monthly amortizations, he decided to pay in the full balance.
Compute the
following : (Factor is 0.02705)
a.
b.
c.
d.
e.

Amount of downpayment
Monthly amortization
Interest expense for 3 months
Balance after 3 months
Final cost/sqm. after full payment

20. Solution:
a) Downpayment = 1,060 sqm. x P1,400.00/sqm. x 50%
b) Monthly amortization = Balance x factor
= P742,000.00 x 0.02705
c)

Amortization
P 20,071.10
20,071.10
20,071.10
Total Interest

P 742,000.00

P 20,701.10

Interest

Principal

P 12,985.00
12,860.11
12,734.81
P 38,580.80

P 7,086.10
7,210.11
7,336.29

Balance
P 742,000.00
734,913.90
727,703.79
720,367.50

NOTE:
Monthly interest is 21% divided by 12 months - 1.75%
Real Estate Mathematics

1.75% of previous balance = amount applied to interest

Amortization less interest = Amount applied to principal
Previous balance less amount applied to principal = New principal balance

VII. PROFIT/ INCOME

21. Mr. Blue sold to Mrs. Reed in June 1997 a residential lot for P960,000.00 inclusive of a
P100,000.00 mortgage to be assumed by the buyer. Mrs. Reed gave a downpayment of
P60,000.00 and the balance shall be paid in 8 equal monthly installments without interest
beginning July 1997. Mr. Blue realized a gross profit of 25% of acquisition cost.
Compute the following:
a.
b.
c.
d.
e.
f.

Selling price
Contract price
Initial payment for taxable year 1997
Gross profit
Gross profit rate for tax purpose
Taxable income for 1997 and 1998

22. Solution:
a)

b)

c)

d)

e)

Payment to Seller
Plus Mortgage Assumed
Selling Price
Selling Price
Less Mortgaged assumed
Contract Price

=
=
=
=
=
=

P 860,000.00
P 100,000.00
P 960,000.00
P 960,000.00
P 100,000.00
P 860,000.00

Downpayment
Installment (July-Dec) P100T x 6 mos.
Total Payment for 1997

=
=
=

P 60,000.00
P 600,000.00
P 660,000.00

P 960,000.00

=
=

P 768,000.00
P 192,000.00

20%

=
=

P 132,000.00
P 40,000.00

Selling Price
Less:
Acquisition (P960,000 divided by 125%)
Gross Profit
Gross Profit
Divide by Selling Price

= P 192,000.00
P 960,000.00

f) Taxable Income for 1997 : 20% of P660,000.00

Taxable Income for 1998: 20% of P200,000.00

23. An investor bought an apartment property for P45M. The property earns a monthly
income of P300,000.00 and its annual fixed and operating expenses total P400,000.00.
What is his rate of return on investment?
Solution:
Annual Net Income =

P 300,000.00 x 12 mos. - P 400,000.00 = P 3,200,000.00

Rate = Annual Net Income

Value

Real Estate Mathematics

P 3,200,000.00
P 45 M

= 7.11%

24. Mr. Cui is into land banking. He bought a 3-hectare rawland at P10/sqm.
a. If his cost of money is compounded 100% every 5 years, what will be his cost
after 20 years?
b. If he will sell the land for P200/sqm. after 20 years, what will be his gross profit?
Solution:
a)

b)

Acquisition Cost/sqm.
After 5 years (P 10 + P10)

=
=

P 10.00
P 20.00

After 10 Years (P20 + P 20)

After 15 Years (P40 + P40)
After 20 years (P80 + P80)

=
=
=

P 40.00
P 80.00
P 160.00

Selling price/sqm.
Unit Cost/sqm.
Gross profit/sqm.

=
=
=

P 200.00
P 160.00
P 40.00

VIII. DETERMINING ACQUISITION COST

25. A 4-door apartment is being rented for P6,000.00 per door, and is subject to annual
maintenance of P14,400.00 and realty tax of P6,000.00. A buyer for the property is
satisfied with a 12% return on investment. At how much should he buy the property?
Solution:
Annual Gross Income : 4 drs. X P6,000.00 x 12 mos.

= P 288,000.00

Less:
Maintenance
Realty Tax

P 14,400.00
P 6,000.00

P 20,400.00

Annual Net Income

=P

267,600.00

Value = Annual Net Income = P 267,600

Rate
12%

= P 2,230,000.00

26. A prospective buyer of a house and lot 300 sqm. consulted his architect who advised him
that the present cost to duplicate the house is P3M. The architect also estimated that
effective age of the house is 10 years and the economic life for such structure is 50
years. If the buyer is willing to pay P5,000.00 per sqm. lot, at how much should he buy
the property?
Solution:
Land : 300 sqm. x P5,000.00
House: Present Reproduction Cost
Depreciation: 10/50 or 20%
Property Value

600,000.00

=
=
=
=

P 1,500,000.00
P 3,000,000.00
2,400,000.00
P 3,900,000.00

27. An apartment property has an annual net income of P150,000.00. A buyer can avail of a
mortgage loan equivalent to 70% of the capital requirement at 15% annual interest. If the

Real Estate Mathematics

buyer is satisfied with a 10% yield on his equity, at how much should he buy the
property?
Solution:
Annual Net Income

P 150,000.00

Capitalization Rate (Band of Investment)

% Portion
Interest

Composite Rate

Equity
Mortgage
Overall Rate

2.5% (25% x 10%)

11.25% (75% x 15%)
13.75 %

25%
75%

10%
15%

Value = Annual Net Income = P 150,000.00

Rate
13.5%

= P 1,090,909.00

28. A property has an annual gross income of P1,200,000.00. In his market study, an
investor found that a comparable property with an annual gross income of P1 Million was
recently sold for P6 Million. On the basis of the gross income multiplier indicated by the
comparable property, at how much should he buy the property?
Solution:
Gross Income Multiplier = Selling price of comparable property =
Annual Gross Income of comparable
Value =
Annual net income of subject x GIM
=
P 1,200,000.00 x 6
=
P 7,200,000.00
Price at which property should be bought

P6M = 6
1M

= P 7,200,000.00

IX. PROPERTY MEASUREMENTS

29. The title of the property describes the land as consisting of 6 hectares, 75 ares, and 800
centares. What is the area of the land in square meters?
Solution:
6 ha.
75 ares
800 centares

x 10,000 sqm./ha.
x 100 sqm.
x 1 sqm.
total

=
=
=
=

60,000 sqms.
7,500 sqms.
800 sqms.
68,300 sqms.

X. APPRAISAL OF PROPERTY
30. A parcel of land has the following features: area is 900 sqm.; it is a corner lot; higher than
the road, and almost rectangular in shape. If the prevailing price in the area if
P10,000.00/sqm. and subject lot has a corner influence of 15%, topographic value of 5%
because of elevation, and plottage value of 10% because of shape, determine the fair
market value of the lot.
Solution:
Value before adjustment : 900 sqms. x P10,000.00
Adjustments: Corner
5% (+)
Real Estate Mathematics

P 9,000,000.00

10

Topography
Plottage

10% (+)
5% (+)
30% of P9,000,000.00

Fair Market Value of Land

P 2,700,000.00

P 11,700,000.00

31. A 5-storey building was constructed on an 800 sqm. lot 10 years ago. Floor area is 400
sqm. per floor. Present reproduction cost of the building is P10,000.00/sqm. and the land
was purchased five years before the building construction at P5,000.00/sqm. Assuming
the depreciation rate of the building is 2.5% per year while land appreciation is 5% per
year, what is the fair market value of the property?
32. Solution:
Land Appreciation
Building Depreciation

=
=

5.0% per year

2.5% per year

Land:
Value before adjustment:
800 sqm. x P5,000
Add: Appreciation:
5.0% x 15 years x P4,000,000
Fair Market Value of Land

P 4,000,000.00

=
=

3,000,000.00
P 7,000,000.00

Building:
Value before depreciation:
5-storey x 400 sqm. x P10,000/sqm.

P 20,000,000.00

Less: Depreciation:
5 years x 2.5% x P20,000,000

P 2,500,000.00
--------------------P 17,500,000.00

=
=
=

Fair Market Value of Building

Total Property Value:
Land
Building
TOTAL

Real Estate Mathematics

7,000,000.00
17,500,000.00
P 24,500,000.00

11