Chapter 12 Flashcards
What are the six steps of developing an income budget?
1) Gather information
2) Budget Base Rent
3) Refine Escalatable Cost Pool
4) Budget Additional Rent
5) Budget Other Income
6) Check for Reasonableness
What information should be gathered in order to prepare an income budget?
Leases Abstracts
Rent Rolls
Upcoming Vacancies
How should base rent be budgeted?
1) Schedule base rent monthly throughout the year keeping in mind expiration dates
2) Increase base rents for stepped increases
3) Indentify success ratios for lease renewals, quantify renewal rates, and include new renewal rate on base rent worksheet
4) Quantify leasing efforts needed to market current and upcoming vacancies, project any anticipated lease-up, and account for anticipated base rent
What factors must be considered when predicting future leasing activity?
Market conditions
Rate per square foot
Amount of tenant improvement allowance
Leasing Commision/Timing of lease commencement
How can the escalatable cost pool be identified?
It is derived from the operating expense budget.
When do CPI increases become effective?
They are effective on the anniversary date of the lease.
How can a CPI increase be calculated for month’s prior to a lease anniversary date?
1) Calculate percentage change between base index and prior year’s index
2) Multiply allowable increase percentage times CPI percentage change from step 1
3) Multiply resulting percentage change times base rent to arrive at increase amount
What items typically fall under the heading of “other income”?
Parking
Storage
Antenna/Satellite Dish
Other
Before calculating the CPI increase, what must be obtained from the tenant’s lease?
Base CPI
Prior Year’s CPI
Allowable increase percentage
Base rent
Fill in the blank: A Budget is simply an ________ of the future performance of the property.
Estimate
List the six basic steps to follow when developing an income budget.
1) Gather information
2) Budget Base Rent
3) Refine esclatable cost pool
4) Budget additional rent
5) Budget other income
6) Check for reasonableness
List the four steps in budgeting base rent.
1) Schedule base rent on a monthly basis throughout the year for each exsisting tenant
2) Increase rent for any stepped increases
3) Identify lease renewal success ratio, quantify renewal rate, put new rate on base rent worksheet
4) Quantify leaseing efforts needed to market current and upcoming vacant spaces and account for the associated leasing costs
Expense Budgets should be prepared with which primary objective in mind?
a) short-term time frame to ultimate sale
b) long-term hold for appreciation
c) owner’s objectives
d) property manager’s objectives
c) owner’s objectives
Budgeting the expense at a particular property can be facilitated by:
a) contracting for all expenses incurred at the property
b) copying the prior year’s budget and adding 5%
c) applying year’s of hand’s on management of the property
d) viewing and preparing the budget for the first time
c) applying year’s of hand’s on management of the property
Employement tax rates may be established by all of the following except:
a) the city government
b) the building owner
c) the state government
d) the federal givernment
b) the building owner
