ch 29-32 Flashcards
1
Q
Give two reasons why a business would want to lease instead of purchase a building
A
Most tenants find leasing to be more cost-effective than owning.
Leasing a building allows more flexibility than owning.
2
Q
What is rentable square footage?
A
Useable square footage, plus a portion of the common areas.
3
Q
What is the loss factor?
A
The difference between the rentable and useable square footage in a building.
4
Q
What does a lease do?
A
The lease assigns rights, duties and responsibilities between the owner (or lessor) and the tenant (or lessee).
5
Q
What is a step-up lease?
A
A lease containing a provision that spells out how the rent will increase periodically and gives the specific amounts and specific dates of those increases.
6
Q
Describe the difference between a gross lease and a net lease.
A
A gross lease is defined as one in which the owner pays all of the operating expenses and the tenant has no responsibility for these expenses.
A net lease is defined as one in which the tenants pay the operating expenses.
7
Q
List five items normally contained in a lease. (See screen 14 for more correct answers.)
A
The date of the agreement
The starting date and the length of the lease
The parties to the lease
The description of the leased space
A description of how the property can be used
8
Q
What does the right of first refusal in a lease give the tenant?
A
This option gives the tenant the right at the end of the lease term to renew the lease of the same space at the current market rate, before it’s offered to other tenants.
9
Q
What is an estoppel certificate designed to do?
A
An estoppel certificate is a document designed to give a third party critical information on the relationship between an owner and his or her tenants.
10
Q
What is the difference between a sublease and an assignment?
A
In an assignment, the tenant conveys the leasehold, with all its title, rights and interests in the leased property, to another person, who then becomes primarily liable for the rent payments to the landlord.
A sublease transfers only a portion of the leasehold interest to another person, leaving the original tenant directly liable for payment of the rent to the landlord.
11
Q
What is the difference between direct metering and submetering of electric usage?
A
With direct metering, the tenant purchases electricity directly from a utility company. In the case of submetering, the tenants pay the owner or the owner’s contracting service company for the electricity they use.
12
Q
Which lease clause would address the issue of a tenant needing to make changes to the leased space?
A
Improvements and Alterations clause
13
Q
What is a lease escalation clause?
A
A clause in which the parties agree to a rent adjustment based on set increases in taxes, insurance, maintenance and other operating costs.
14
Q
What is the base year?
A
Typically, the base year is the first full year of operation. However, it can be less than 12 months or more than 12 months, depending on what the owner and tenant negotiate at the time the lease is signed.
15
Q
What is Porter’s Wage Escalation Formula?
A
An indexed escalation formula based on the contract entered into every three years between the local building services union and a coalition of New York building owners. The formula provides that the rent will increase a specific amount per square foot based on a specified increase in a porter’s hourly wage.
16
Q
Why might tenants leasing industrial property prefer to have very long-term leases?
A
They might have this preference if they are installing expensive equipment that would be very difficult to move.
17
Q
There are some important reasons why a business would choose to lease space rather than purchase the building.
A
Most tenants find leasing to be more cost-effective than owning.
Owning a building would reduce the flexibility of the business.
Engaging in maintenance and repair activities could cause the business to lose focus on its major business activities.
If a business decided it wanted to downsize, the building owner would have to find someone to use or purchase the excess space.
18
Q
Useable square footage?
A
is the footage within the tenant’s space and excludes such things as elevator shafts, public restrooms, heating and air conditioning equipment areas, and public stairwells
19
Q
Rentable square footage?
A
is typically the useable square footage, plus a portion of the common areas
20
Q
loss or load factor?
A
The difference between the rentable and useable square footage in a building
21
Q
common areas?
A
of commercial building include lobbies, elevators, escalators, hallways, public restrooms and utility areas.
22
Q
lease
A
assigns rights, duties and responsibilities between the owner (or lessor) and the tenant (or lessee)
23
Q
Some common rent calculation methods include:
A
Flat Lease- Rents may remain the same for the term of the lease.
Step-Up - Lease that spells out how the rent will increase periodically and gives the specific amounts and specific dates of those increases.
Indexed - A lease that adjusts the rent payments using a specified index such as the consumer price index (CPI). When using this method, the rent adjusts periodically according to the change in the consumer price index.
Percentage Rent -With this method, the rent is based partially on the tenant’s sales volume.
24
Q
gross lease?
A
is defined as one in which the owner pays all of the operating expenses and the tenant has no responsibility for these expenses.
25
net lease?
is defined as one in which the tenants pay the operating expenses
26
concessions?
Some lease contracts can contain concessions that can lower the rental rates.
27
lease renewal option?
allows the tenant to renew the lease for a specified rent amount when the lease expires.
28
right of first refusal?
option gives the tenant the right at the end of the lease term to renew the lease of the same space at the current market rate, before it's offered to other tenants.
29
tenant relocation option?
allows the owner to relocate the tenant to another space in the same building during the term of the lease.
30
Several lease clauses are generally included in all commercial leases:
Use Clause - Restricts a commercial tenant's use of the rented space by indicating what business activities are allowed by the tenant.
Subordination, Non Disturbance and Attornment - The document that an owner, tenant and lender often use to describe and verify how their rights do and will overlap.
Estoppel - Designed to give a third party critical information on the relationship between an owner and his or her tenants.
Sublease/Assignment - Not usually allowed without the owner's consent. A sublease transfers only a portion of the leasehold interest to another person. In an assignment, the tenant conveys the leasehold, with all its title, rights and interests in the leased property, to another person.
Electric Service - The individual metering of apartments can take the form of either direct metering or submetering.
31
difference between direct and submetering?
With direct metering, the tenant purchases electricity directly from a utility company which installs the electric meter, reads the tenant's electricity usage and bills the tenant at a residential rate.
In the case of submetering, the tenants pay the owner or the owner's contracting service company for the electricity they use.
32
Other clauses that can be found in a commercial lease include:
Premises Clause
Term Clause Security Deposits
Improvements and Alterations Maintenance, Utilities, and Code Compliance
Parking, Signs, Landlord's Entry, and Security
Insurance Clauses
33
lease escalation clause?
Many long-term commercial leases contain a lease escalation clause in which the parties agree to a rent adjustment based on set increases in taxes, insurance, maintenance and other operating costs.
34
There are several different types of lease escalation clauses:
Proportionate Shares of Occupancy - The tenant will be responsible for paying its proportionate share of any increases in operating costs based on the percentage of the space that tenant occupies.
Base Year - Tenants will not have to pay any increases under the lease escalation clauses until after the base year has passed. Base year is the first year of operation.
Operating/Tax Stop - Stipulates an amount of operating expenses above which the tenant must bear.
Real Property Tax Clause - Provides for tenants to pay a specified percentage of tax increases over a base tax figure.
Direct Operating - Passes on prorated increases in taxes, heat, maintenance and other direct costs.
35
Other clauses that can be found in a commercial lease include:
Premises Clause: contains the official grant of lease and the description of the extent of the grant.
Term Clause Security Deposits:
Improvements and Alterations Maintenance, Utilities, and Code Compliance
Parking, Signs, Landlord's Entry, and Security
Insurance Clauses
36
lease escalation clause?
Many long-term commercial leases contain a lease escalation clause in which the parties agree to a rent adjustment based on set increases in taxes, insurance, maintenance and other operating costs.
37
There are several different types of lease escalation clauses:
Proportionate Shares of Occupancy - The tenant will be responsible for paying its proportionate share of any increases in operating costs based on the percentage of the space that tenant occupies.
Base Year - Tenants will not have to pay any increases under the lease escalation clauses until after the base year has passed. Base year is the first year of operation.
Operating/Tax Stop - Stipulates an amount of operating expenses above which the tenant must bear.
Real Property Tax Clause - Provides for tenants to pay a specified percentage of tax increases over a base tax figure.
Direct Operating - Passes on prorated increases in taxes, heat, maintenance and other direct costs.
38
Other lease escalation clauses:
Porter's Wage Escalation Formula - An indexed escalation formula provides that the rent will increase a specific amount per square foot based on a specified increase in a porter's hourly wage.
Consumer Price Index (CPI) - Rate of rent escalation based on changes in the cost of living.
Fixed Percentage Increases - A way of escalating rent by increasing it by a fixed percentage each year
39
Different property types customarily have different lease terms.
Hotel and motel rooms typically rent on a daily basis.
Homes and apartments are usually leased on a yearly basis.
Space in office buildings tends to be leased for a three to five year term.
Retail space leases vary considerably, from only one or two years to much longer.
Many industrial properties have a three to five year term, although many tenants prefer longer-term leases.
Agricultural leases can vary depending on the use of the property. Leases for hunting rights are typically shorter than farming leases - hunting leases are usually for one year while farming leases typically last three or more years.
40
What are the capital gains exclusions associated with the sale of a personal residence and how often can the exclusion be used?
A single seller can exclude up to $250,000 of gain and a couple can exclude up to $500,000. The exclusion can be used once every two years.
41
Dan and Gail purchased a home 15 years ago for $200,000. They have done some recent remodeling that cost another $50,000. They sold their home for $350,000 and paid $25,000 in selling expenses. What is their gain and on what part of that will they owe taxes?
Initial Basis $200k
Improvements +$50k
Adjusted Basis $250k
Sale Price $350k
Sales Expenses -$25k
Amount Realized $325k
Amount Realized $325k
Adjusted Basis -$250k
Gain (before exclusion) $75k
Since Dan and Gail are allowed an exclusion of $500,000, they will not owe any taxes on their gain.
42
What is the difference between active income and passive activity income?
Active income is income for which the taxpayer performs services. Passive activity income is income from rental activity, limited business interests or other activities in which the investor does not materially participate.
43
What tax deduction can an owner of an income-producing property take that the owner of a personal residence cannot take?
Depreciation
44
What is the definition of a like-kind exchange?
One property can be exchanged for another property regardless of the property type, as long as it is held as an investment or for use in a trade or business.
45
List three kinds of property eligible for like-kind exchange. (See screen 22 for other correct answers.)
Commercial property
Industrial property
Leaseholds greater than 30 years
46
What is boot and is it taxable?
In a like-kind exchange, any cash or relief one party receives in addition to the actual property is called boot. The person who receives the boot has a net gain and must pay taxes on it.
47
What are the two critical timelines that apply to 1031 exchanges?
The identification period, during which the party selling a property must identify other replacement properties that he or she proposes or wishes to buy. This period is scheduled as exactly 45 days from the day of selling the relinquished property.
The exchange period, within which a person who has sold the relinquished property must receive the replacement property. This period ends at exactly 180 days after the date on which the person transfers the relinquished property or the due date for the person's tax return for the taxable year in which the transfer of the relinquished property took place.
48
What kinds of mortgage loans are eligible for interest tax deductions?
A mortgage to buy a home
A second mortgage
A line of credit
A home equity loan
49
What is grandfathered debt?
Debt on mortgages taken out on or before October 13, 1987.
50
What is home acquisition debt?
Home acquisition debt or financing is a mortgage that was taken out after October 13, 1987 to buy, build or substantially improve a qualified home - defined as a main or second home.
51
What is the IRS rule about deducting the full amount of points in the year they are paid?
As a general rule, a homeowner cannot deduct the full amount of points in the year they are paid. Because they are prepaid interest, the borrower will usually deduct them equally over the life of the mortgage. However, if the homeowner meets a set of nine tests the IRS has set out, the full amount of the points may be deducted in the year paid.
52
What is the IRS rule about deducting prepayment penalties?
A homeowner may deduct the penalty as home mortgage interest provided the penalty is not for a specific service performed or a cost incurred in connection with the mortgage loan.
53
What is the definition of a low-income household?
A low-income household is defined as one having an income of 60 percent or less of the area median adjusted for household size.
54
What is the class life for residential and non-residential buildings?
Residential is 27.5 years.
| Non-residential is 39 years.
55
What is straight-line depreciation?
Straight-line depreciation means that the depreciation is computed by dividing the building's cost by the number of years of its class life.
56
marginal tax bracket?
Taxpayers fall into any one of a number of tax brackets, depending on their level of income. The tax rate that applies to income is called the marginal tax bracket.
57
The Taxpayer Relief Act, signed into law by President Clinton in August of 1997, reduced several federal taxes in the United States. The highlights of this act include:
Capital Gains
Home Sales
Retirement Savings
Alternate Minimum Tax
58
IRA funds?
An individual retirement account is an investing tool used by individuals to earn and earmark funds for retirement savings.
They can use the funds to pay up to $10,000 of the cost of their new home. The home buyer can use the IRA funds for costs including settlement, financing, or other closing costs.
59
tax deductions
State and local property taxes can be deducted as an expense against the owner's income; however, the real estate taxes are only deductible in the year they are actually paid to the government.
A mortgage interest deduction is allowed on a qualified home - defined as the main or second home. The homeowner can usually deduct all of the mortgage interest as long as he or she itemizes the deductions and is legally liable for the loan.
60
Capital gain?
Capital gain is the amount by which an asset's selling price exceeds its initial purchase price.
The tax laws allow a special exclusion on capital gains for homeowners selling their own home. A seller can exclude up to $250,000 of any capital gain on the sale. If the sellers are a married couple, they can exclude up to $500,000 in gain. This exclusion can be used once every two years. (Even though federal law allows this exclusion every two years, the law states that the seller must have lived in the home for two out of the last five years to qualify for the exclusion.The special exclusion can work for a second or vacation home also under certain circumstances. )
61
realized capital gain
A realized capital gain is an investment that has been sold at a profit.
62
unrealized capital gain
An unrealized capital gain is an investment that hasn't been sold yet but would result in a profit if sold.
63
Short-term capital gains
Short-term capital gains are profits received from the sale of capital assets that were held for less than a year.
64
Long-term capital gains
Long-term capital gains are profits on capital assets held for longer than a year.
65
capital loss
An individual has a capital loss if he or she sells an asset for less than the purchase price.
66
IRS defines gain on the sale of a home
The IRS defines gain on the sale of a home as the amount realized from the sale minus the adjusted basis of the home sold.
67
Basis
Basis is a measurement of how much is invested in the property for tax purposes.
68
Active income
Active income is income for which the taxpayer performs services.
69
Passive activity income
Passive activity income is income from rental activity, limited business interests or other activities in which the investor does not materially participate.
70
Portfolio income
Portfolio income is income from such sources as dividends, interest, capital gains, and royalties.
71
depreciation
During the time that a property owner holds an investment property, he or she can take a tax deduction known as depreciation.
72
section 1031
Under Section 1031, a property that is held for productive use in a trade or business can be exchanged for like-kind property. This is also known as a tax-deferred exchange.
The properties must be "like-kind" in nature or character, not in use, quality or grade. Real estate investors must realize that one property can be exchanged for another property regardless of the property type, as long as it is held as an investment or for use in a trade or business.
73
boot
Any cash or relief one party receives in addition to the actual property is called boot.
74
The IRS requires that a Qualified Intermediary (QI) must be used to facilitate the 1031 exchange transaction. A Qualified Intermediary is responsible for performing the following activities in a 1031 Exchange:
Acquiring the relinquished property from the taxpayer
Transferring the relinquished property to the buyer
Acquiring the replacement property from the seller
Transferring the replacement property to the taxpayer
75
The identification period
The identification period is the critical period during which the party selling a property must identify other replacement properties that he or she proposes or wishes to buy. This period is scheduled as exactly 45 days from the day of selling the relinquished property.
76
The exchange period
The exchange period is the period within which a person who has sold the relinquished property must receive the replacement property. This period ends at exactly 180 days after the date on which the person transfers the relinquished property or the due date for the person's tax return for the taxable year in which the transfer of the relinquished property took place, whichever situation is earlier.
77
There are several different types of exchanges:
Simultaneous Exchange
Delayed Exchange
Build-to-Suit (Improvement or Construction) Exchange
Reverse Exchange
78
grandfathered debt
Mortgages taken out on or before October 13, 1987. This is called grandfathered debt.
79
home acquisition debt.
Mortgages taken out after October 13, 1987 to buy, build, or improve the home. This is called home acquisition debt.
80
home equity debt
Mortgages taken out after October 13, 1987 other than to buy, build, or improve the home. This is called home equity debt.
81
home acquisition debt
The total amount that can be treated as home acquisition debt at any time on the main and second home cannot be more than $1 million ($500,000 if married filing separately). This limit is reduced by the amount of any grandfathered debt.
82
The amount of debt that can be treated as home equity debt has a limit. The total home equity debt on a main and second home is limited by the smaller of these:
The amount of debt that can be treated as home equity debt has a limit. The total home equity debt on a main and second home is limited by the smaller of these:
$100,000 ($50,000 if married filing separately)
The total of each home's fair market value (FMV) reduced (but not below zero) by the amount of its home acquisition debt and grandfathered debt. The homeowner must determine the FMV and the outstanding home acquisition and grandfathered debt for each home on the date that the last debt was secured by the home.
83
points
The term "points" describes certain charges that are paid, or treated as paid, by a borrower to obtain a home mortgage. The IRS says that as a general rule, a homeowner cannot deduct the full amount of points in the year they are paid. Because they are prepaid interest, the borrower will usually deduct them equally over the life of the mortgage.
A homeowner can fully deduct points in the year paid if he or she meets all of the nine tests set out by the IRS.
Points paid on a second home cannot be fully deducted in the year paid. They can only be deducted over the life of the loan.
A homeowner may deduct a prepayment penalty as home mortgage interest provided the penalty is not for a specific service performed or a cost incurred in connection with the mortgage loan.
84
The Low-Income Housing Credit Program (LIHC) was established under the Tax Reform Act of 1986
to promote private sector involvement in the retention and production of rental housing that is reserved for low-income households
a dollar-for-dollar tax credit
A low-income household is defined as one having an income of 60 percent or less of the area median adjusted for household size.
85
Tax depreciation
Tax depreciation is a deduction that allows an investor to write off the cost of his or her investment in income-producing property.
86
The class life for qualifying residential structures
The class life for qualifying residential structures, which are defined as buildings that get 80% of their gross rents from residential tenants, is 27.5 years.
87
The class life for nonresidential buildings purchased after May 12, 1993
39 years
88
Straight-line depreciation
means that the depreciation is computed by dividing the building's cost by the number of years of its class life.
89
Stan sold his investment property for $97,000 and had $8,000 in closing costs. The property had a beginning basis of $77,000, capital improvements of $4,000, and depreciation of $15,000. What was Stan's capital gain?
The amount realized is $89,000 ($97,000 - $8,000).
The adjusted basis is the initial cost of the property plus any capital improvements minus the depreciation – in this case $66,000 ($77,000 + $4,000 - $15,000).
The capital gain for this property is $23,000 ($89,000 - $66,000).
90
Define the term mortgage broker.
A mortgage broker is a person registered by the New York State Banking Department who engages in the business of soliciting, processing, placing or negotiating mortgage loans for others.
91
What kind of experience must a mortgage broker have?
A minimum of two years of credit analysis or underwriting experience with an exempt organization, mortgage banker, mortgage broker or licensed lender.
92
Under what circumstances must a mortgage broker use a dual agency disclosure form?
If the mortgage broker is also the real estate broker in the same residential real estate transaction.
93
List three disclosures that must be made at or before the time of application. (See screens 7 and 8 for other correct answers.)
The mortgage broker cannot guarantee acceptance into any particular loan program, nor can that mortgage broker promise any specific loan terms or conditions.
The specific services which will be provided or performed for the application fee and/or the processing fee.
The fact that certain mortgage loan products impose a pre-payment penalty on the borrower and a statement that the amount and terms of the pre-payment penalty will be disclosed to the borrower as soon as they are known.
94
Define the term mortgage banker.
A person, corporation or firm licensed by the New York Banking Department to make residential mortgage loans.
95
What kind of credit line must mortgage banker applicants have?
An existing line of credit of at least $1 million provided by a banking institution, an insurance company or a similar credit facility approved by the Superintendent of Banking.
96
How do mortgage brokering and mortgage banking differ with regard to loan servicing?
Most mortgage companies get their income from doing loan origination and servicing those loans. Mortgage brokers originate loans but do not service them.
servicing loans:
collecting payments.
tax record preparation.
loan analysis.
97
What are the components of a rate lock?
The loan program
The interest rate
Points
Length of the lock
98
mortgage broker
is a person registered by the New York State Banking Department who engages in the business of soliciting, processing, placing or negotiating mortgage loans for others on one- to four-family, owner-occupied residential property.
99
State of New York Banking Department
supervises and regulates all mortgage brokers working within the State.
100
Applicants who want to become a mortgage broker in New York
must have a minimum of two years of credit analysis or underwriting experience with an exempt organization, mortgage banker, mortgage broker or licensed lender and submit a surety bond ranging in amount between $10,000 and $100,000, as well as meet other requirement
$1500 investigation fee
101
mortgage broker dual agency disclosure form.
If the mortgage broker or mortgage banker is also the real estate broker in the same residential real estate transaction, the dual role must be disclosed at the first substantive contact between the mortgage broker and the buyer/borrower using the appropriate disclosure form and acknowledgment,
102
Disciplinary action for violating banking law may include:
Temporary or permanent deletion from the mortgage broker roll.
Suspension or revocation of a license to engage in the business of mortgage banking.
Fines assessed by the Banking Department, limited to $5,000 per violation, $100,000 per proceeding.
103
mortgage banker
s a person, corporation or firm licensed by the New York Banking Department to make residential mortgage loans. Mortgage bankers (also called mortgage companies) provide their own funds for mortgage financing.
104
Applicants for a mortgage banker license in New York must
have an existing line of credit of at least $1 million provided by a banking institution, an insurance company or a similar credit facility approved by the Superintendent of Banking. They must also provide an original mortgage banker bond in the amount of $50,000 furnished by a surety company authorized to conduct business in New York or execute a deposit agreement with a pledge of securities or funds in the amount of $50,000.
105
A mortgage broker's role
is to act as an intermediary between the borrower and the lender. A mortgage broker can obtain a prequalification or preapproval letter from a lender.
106
A mortgage broker can lock in
an agreed-upon interest rate when the borrower requests him or her to do so. A lock- in is for a specified amount of time. The longer the length of the lock, the higher the interest rate or the points will be.
107
A mortgage broker's commission is paid by:
The buyer
Proceeds from the loan
A lender rebate
108
To whom is a property manager responsible?
A property manager is responsible BOTH to the owner and to the tenants of a property.
109
What is the definition of a resident manager?
A resident manager lives on the property and may be employed by a real estate broker, a managing agent or an owner to manage a property on a part-time or full-time basis.
110
What is the difference between a management proposal and a management agreement?
A management proposal is submitted to the owner for review before any formal agreement is made.
The management agreement is the employment contract for a property manager.
111
How do the owner and the property manager arrive at a management fee?
The fee is a negotiated item. It often is a base fee and/or a percentage of the collected rents.
112
What accounting skills are important for a property manager to have?
The manager must understand general accounting principles (GAP) and be able to prepare and interpret monthly and yearly reports.
113
List three skills needed by office building managers. (See screen 18 for other correct answers.)
Analyze the local demographics to attract tenants
Negotiate leases
Develop competitive rent schedules
114
What tasks do managers of condos, co-ops and PUDs do that are different from other property managers?
They take care of the budgets and collect assessments, coordinate maintenance of the common areas, deal with landscaping and security issues, and enforce the regulations set forth by the association or board of directors.
115
What is a property manager's first responsibility to the owner?
To realize the maximum profit on the property that is consistent with the owner's instructions.
116
What are the three types of budgets that should be established for each project?
Operating budget
Capital reserve budget
Stabilized budget
117
How does preventive maintenance differ from corrective maintenance?
Preventive maintenance is a schedule of planned maintenance actions aimed at the prevention of breakdowns and failures, while corrective maintenance involves the repair or replacement of components which have already failed or broken down.
118
What kind of reports should a property manager be giving to the owner?
Monthly account statements
Delinquent accounts report
Detailed annual statement
119
Property management
can be defined as the administration of rental or other property by a person or a team of people who are acting for the owner.
120
There are several types of property managers.
An individual property manager is usually a real estate broker who manages properties for one owner or a number of owners.
An individual building manager usually manages a single large property.
A resident manager lives on the property.
A real estate asset manager acts as the property owners' agent and adviser for the property.
121
management proposal
Before entering into a formal agreement, a property manager will submit a management proposal to the property owner.
122
management agreement
is the employment contract for a property manager. The owner is the principal and the property manager is the general agent in this agreement. A property management agreement would contain some or all of the following information:
```
The beginning date of the contract
Identification of the parties
Property description
Duration of the agreement
Definition of manager responsibilities
Definition of owner responsibilities
Extent of authority
Accounting responsibilities
Insurance and risk management
Reporting requirements
Management fee
Agreement Termination
```
123
To be a competent property manager, the individual must possess a number of important skills in several areas.
```
Supervision
Accounting
Building System Knowledge
Landlord-Tenant Relations
Lease Space
Advertising
Codes and Regulations
Union Negotiations
Purchasing
Financial Matters
Building Construction
Ecology
The property manager is technically the employer of almost all the people who work on site. As such, the manager is responsible for their instruction and supervision and should know the details of each employee's job.
```
A property manager should set policies which will give tenants the most benefits that they can get while still ensuring a good return to the owner.
124
Property management services are available for different types of properties.
Office building management - Office property is a type of income-producing commercial property from which a particular service is rendered.
Retail management - Retail properties deal with the buying and selling of commodities or goods.
Residential management - Residential properties include single-family dwellings, apartments, condos, co-ops, vacation homes and mobile home parks.
Condominium and cooperative management - A planned unit development, or PUD, is a type of building development with a designed grouping of varied and compatible land uses, such as housing, recreation, commercial centers, and industrial parks, all within one contained development or subdivision.
125
A property manager should establish three types of budgets for each rental project.
Operating budget
Capital reserve budget
Stabilized budget
126
A critical task for a property manager is the supervision of the property's maintenance. There are basically three types of maintenance:
Preventive maintenance is a schedule of planned maintenance actions aimed at the prevention of breakdowns and failures.
Corrective maintenance involves the repair or replacement of components which have failed or broken down.
Construction involves remodeling, interior redecorating or new capital improvements.
127
property management reports
The property manager must set up and maintain proper records, making regular reports, called property management reports, to the owner that are easily understandable and that cover all operations. A property manager should provide the owner with:
Monthly account statements
Delinquent account reports
A detailed annual statement
128
When a property manager or management company performs real-estate-related tasks (such as collecting rent) for one owner, and that owner is paying the manager a salary,
the property manager is not required to have a real estate license.
129
8 of 9 - When thinking about tenant retention and owner profits, a property manager should
give tenants the most benefits possible while still ensuring a good return to the owner.
