Chapter 12: Property Management

Question 1

budget comparison statement

Answer 1

Compares actual results with the original budget, often giving either percentages or numerical variance of actual versus projected income and expenses

Question 2

cash flow

Answer 2

The net spendable income from an investment, determined by deducting all operating and fixed expenses from the gross income. When expenses exceed income, a negative cash flow results

Question 3

deferred maintenance

Answer 3

The act of postponing necessary maintenance and repairs on rental properties

Question 4

effective gross income (EGI)

Answer 4

The anticipated income from a rental property resulting from potential gross income minus an allowance for vacancy and bad debts

Question 5

net operating income (NOI)

Answer 5

The income projected for an income-producing property after deducting losses for vacancy and collection and operating expenses

Question 6

operating expenses

Answer 6

Periodic and necessary expenses essential to the continuous operation and maintenance of an income property

Question 7

potential gross income

Answer 7

The amount of rental income the property could produce with 100% occupancy and with all tenants paying full rent; also called scheduled gross income

Question 8

profit and loss statement

Answer 8

A detailed statement prepared on a periodic basis showing the financial picture of a business through the revenues and expenses; also called operating statement

Question 9

property management agreement

Answer 9

An agency contract between the owner of income property and a management firm or an individual property manager that outlines the scope of the manager’s authority

Question 10

property manager

Answer 10

Broker who for compensation preserves the value of an investment property while generating income as an agent for the owner. Duties include collecting rents, maintaining the property, and keeping up all accounting

Question 11

rental schedule

Answer 11

A statement of proposed rental rates, determined by the owner, or the property manager, or both, based on a building’s estimated expenses, market supply and demand, and the owner’s long range goals for the property

Question 12

vacancy and collection losses

Answer 12

The amount of income lost due to empty units or tenants not paying full rent

Question 13

vacancy rate

Answer 13

The percentage of the total space that is unoccupied