Methodology & Formulas

Mortgage Payment (PITI) — Form RET-101

The monthly payment is calculated with the standard amortization formula:

M = P × [r(1+r)ⁿ] / [(1+r)ⁿ − 1]

Where P = principal (home price minus down payment), r = annual rate ÷ 12, n = term in months. The result is principal and interest only; property taxes and insurance are added separately for a full PITI estimate.

Assumption: PMI is estimated at 0.5%–1% of loan amount annually for loans below 80% LTV. Actual PMI varies by lender, credit score, and loan type.

Amortization Schedule

Each month, interest is calculated on the remaining balance: interest = balance × r. The principal portion is payment − interest. The schedule reduces the balance by that principal each month until the balance reaches zero.

Refinance Break-Even

Break-even months = closing costs ÷ (old monthly payment − new monthly payment). If the break-even is shorter than the time you plan to stay in the home, refinancing saves money.

Home Affordability (28/36 Rule)

Maximum home price = (gross monthly income × 0.28 − monthly taxes & insurance) ÷ monthly factor for the given rate/term. The 36% total-debt rule is checked separately against all debts.

Cap Rate & Cash-on-Cash Return

Cap Rate = NOI ÷ Purchase Price. Net Operating Income = gross rental income minus vacancy, taxes, insurance, maintenance, and management fees. Cash-on-Cash = annual cash flow ÷ total cash invested (down payment + closing costs).

Closing Costs

Estimated as a percentage of the home price (typically 2%–5%) broken into lender fees (1%–2%), title insurance (0.5%–1%), escrow/prepaids (0.5%–1%), and transfer taxes (varies by state). The tool uses median values per category; actual costs vary by lender and jurisdiction.

Paint — Form RET-201

Wall area = perimeter × ceiling height. One gallon covers approximately 350–400 sq ft (one coat). The tool uses 350 sq ft/gal as a conservative estimate and rounds up to the nearest gallon. Two coats doubles coverage.

Concrete — Form RET-202

Volume in cubic feet = length × width × depth. Convert to cubic yards by dividing by 27. One cubic yard = approximately 4,000 lbs (2 tons) of ready-mix. The tool adds 5%–10% waste factor.

Roofing — Form RET-204

Roof area = footprint area ÷ cos(pitch angle). One roofing square = 100 sq ft. The tool uses the most common residential pitch (6/12) for the default, adjusted by the pitch selector. Waste factor: 10% for standard shapes, 15%+ for valleys and dormers.

Flooring — Form RET-205

Area = length × width, plus 10% waste. Hardwood planks are priced per square foot; tile is priced per box (typically 10–20 sq ft/box) and is rounded up to full boxes.

Wallpaper — Form RET-213

Gross wall area = perimeter × ceiling height, minus windows (15 sq ft each) and doors (21 sq ft each). Rolls needed = net area ÷ roll coverage, rounded up, plus 10%–15% waste. Roll coverage = roll width (in feet) × roll length (in feet). US single rolls cover approximately 28 sq ft of wall; double rolls/bolts cover 56 sq ft. Pattern repeat increases waste proportionally.

Drywall — Form RET-210

Sheet area = 4' × 8' = 32 sq ft (standard). Number of sheets = wall area ÷ 32, rounded up, minus window/door deductions. The tool accounts for cut waste and the orientation of each sheet.

Prorated Rent — Form RET-301

Daily rate = monthly rent ÷ days in that month. Prorated amount = daily rate × days of occupancy. The tool uses the actual number of days in the specific month (28–31), not a 30-day average.

Vacancy Cost

Monthly cost = (annual mortgage payment + taxes + insurance) ÷ 12 × months vacant. Opportunity cost = lost rent − carrying costs during the vacancy period.

Depreciation (Residential)

Annual depreciation = (purchase price − land value) ÷ 27.5 years. Land is estimated at 20%–30% of total purchase price unless specified. Straight-line method per IRS Publication 946.

Capital Gains Tax

Gain = sale price − adjusted basis (purchase price + improvements − depreciation claimed). Tax rate: 0%, 15%, or 20% based on filing status and income (per IRS long-term capital gains brackets). A 3.8% NIIT surcharge applies above certain income thresholds.

Sale Proceeds — Form RET-401

Net proceeds = sale price − remaining mortgage balance − selling costs (agent commission 5%–6%, closing costs 1%–2%, transfer taxes). Agent commission is the largest variable; the tool uses 5% as default.

1031 Exchange — Form RET-402

The tool tracks the identification deadline (45 days after sale) and closing deadline (180 days after sale) per IRC §1031. It estimates the deferred gain and the step-up in basis. Limitations: the tool does not account for built-in gain recapture on depreciation (IRC §1250) or the interaction with opportunity zones.

Rent vs. Buy Break-Even

The tool compares the total cost of renting (rent × months + renter's insurance + security deposit) against the total cost of buying (down payment + monthly PITI × months + closing costs + maintenance − equity gained − tax benefit). The break-even month is where buying's cumulative cost drops below renting's. Tax benefit is estimated using the 22% bracket and standard deduction; actual tax impact depends on itemization.