Notes Flashcards
Many mortgage lenders require that ___ hire a professional property manager to manage their properties.
Investors
The ___ carries out the goals of the property owner by making sure the property earns income
Property manager
The property manager has an agency relationship with the ___, which involves greater authority and discretion over management decisions than an employee would have.
Owner
In IL, the ___ was created to regulate community association managers, to ensure that managers are qualified to engage in community association management, and to enforce high standards of professional conduct by those licensed.
The Community Association Manager Licensing and Disciplinary Act
In IL, what is required to perform community association management activities?
A Community Association Manager License
___ assist in providing a comprehensive array of services to volunteer boards in condos and homeowners associations.
Community Association Managers
Many states require at least a(n) ___ license or a(n) ___ license for those who specialize in managing community associations
real estate
association management
___ monitor a portfolio of properties similar to a securities portfolio by analyzing the performance of the properties and making recommendations to the owners of the properties.
Asset management
Real property ___ helps clients decide what type of real estate to invest in (commercial or residential), which property is best to purchase, the best financial sources, and when to dispose of the property
asset management
In IL, ___ manage properties for corporations that invest in real estate.
Corporate property managers
Hiring a(n) ___ allows a corporation to invest in real estate without having specialized knowledge in property management.
Corporate property manager
Property management agreements must be…
in writing
In IL, property management requires a(n) ___ and an individual must perform services under supervision of ___.
real estate license, supervision of a sponsoring broker
In preparing a management plan, a property manager analyzes what 3 factors?
1) owner’s objectives
2) regional and neighborhood market
3) specific property
Management plans also include a budgetary section that lists ___ and ___.
Sources of revenue and anticipated expenses
A(n) ___ is a present document that is forward-looking in determining the feasibility of a property owner’s long-term goals for a specific property
management plan
What is the first step in taking over the management of any property?
Enter into a management agreement with the owner
The ___ creates a general agency relationship between the owner and the property manager, and defines the duties and responsibilities of each party
management agreement
The ___ is a guide used in operating the property as well as a reference in case of future disputes between the owner and property manager.
management agreement
Management agreements should be…
in writing
What 9 things should be included in a management agreement?
1) Description of property
2) Time period the agreement covers
3) Management responsibilities
4) Statement of the owner’s purpose
5) Extent of manager’s authority
6) Reporting
7) Management fee
8) Allocation of costs
9) Equal opportunity statement
In a management agreement, the description of the property should include which 2 things?
1) Legal description
2) Street address
In a management agreement, the ___ should clearly state what the manager is to accomplish.
Owner’s purpose
Residential property managers often earn ___ when they find new tenants for a property.
Commission
Rental commissions are usually based on…
Annual rent for the property
If an apartment rents for $1,200 per month and the commission payable is 8% of the annual rent, what is the total amount in commission?
$1,152
1200 x 12 = 14400
14400 x 0.08 = 1152
The projection of income and expenses for the operation of a property over a 1-year period
Operating budget
The ___ is based on anticipated revenues and expenses and serves as a guide for the property’s anticipated financial performance
Operating budget
___ includes gross rents collected, delinquent rental payments, vending, late fees, and storage fees
Income
Any losses from uncollected rental payments or evictions are deducted from the total gross income to arrive at the ___
total adjusted income
In some properties, there may be space that is not income producing such as the property manager’s office. The rental value of the property that is not producing income is subtracted from the gross rental income to equal the ___ income
Gross collectible
AKA Gross billable income or gross rental income
gross collectible income
___ expenses remain constant and do not change.
Fixed
___ expenses may be recurring or nonrecurring
Variable
Employee wages, utilities, and other basic operating costs are ___ expenses
fixed
Capital improvements, building repairs, and landscaping may be ___ expenses
variable
a monthly statement that details the financial status of the property
cash flow report
The most important financial report in property management because it provides a picture of the property’s current financial status
Cash flow report
Gross rental income + other income - losses = ___
total income
Total income - operating expenses = ___
net operating income before debt service
net operating income before debt service - debt service - reserves = ___
cash flow
A financial picture of revenues and expenses used to determine whether the business has made money or suffered a loss.
Profit and loss statement
The profit and loss statement is created from the monthly ___.
cash flow reports
The profit and loss statement does NOT include ___.
Itemized information
The ___ compares the actual results with the original budget, often giving either percentages or numerical variance of actual versus projected income and expenses.
Budget comparison statement
___ are helpful to identify trends in order to help with future budget planning
Budget comparison statement
Rental rates are influenced by…
supply and demand
Commercial rents are usually stated according to either ___ or ___ rates per ___.
monthly or annual rates per square foot
Residential rent is usually stated as the ___ rate per ___.
monthly rate per unit
If the occupancy level of an apartment or office building exceeds 95%, the property manager should…
investigate the rental market to determine whether a rent increase is warranted
Residential property managers must always comply with ___ in selecting tenants.
fair housing
Fair housing laws do not apply to ___ properties, however their property managers still need to be aware of federal, state, and local anti-discrimination and equal opportunity laws that may govern ___ or ___ properties.
commercial
industrial
retail
Terms of rent payment should be spelled out in the lease agreement and include which 3 things?
1) Time & place of payment
2) Provisions & penalties for late payment and returned checks
3) Provisions for cancellation and damages in case of nonpayment
In the event of nonpayment of rent, the property manager should establish a(n) ___ that includes a system of notices and records in compliance with state and local law
Collection plan
In the event of nonpayment of rent, every attempt must be made to collect rent without resorting to ___.
Legal action
In IL, property managers must put security deposits in a(n) ___.
special escrow account
In IL, how are security deposits for leases similar to earnest money for a mortgage?
Both must be deposited into a special escrow account
In IL, all brokers must collect all compensation for brokerage services through their ___.
sponsor
In IL, residential leasing agents cannot engage in leasing activities for ___ property.
Commercial
In IL, security deposits must be deposited into the escrow account by ___ and it must be ___
the next business day after a lease is signed
recorded in the journal and ledger
In IL, the escrow account for security deposits is non-interest-bearing UNLESS…
The property is residential with 25 or more units
When must interest be paid to tenants on security deposits in IL?
If the residential property has 25 or more units
A good property manager acts to the benefit of…
Both the owner and occupants
Keeping a property in good condition involves which 4 types of maintenance?
1) Preventative (periodic/ seasonal)
2) Repair or corrective (PRN)
3) Routine (daily or ordinary)
4) Tenant improvements
__ maintenance preserves the long-range value and physical integrity of the building
preventative
What is the most critical maintenance activity?
Preventative
What is the most neglected maintenance activity?
Preventative
Failure to perform ___ maintenance leads to greater expense in other areas of maintenance
preventative
___ maintenance involves actual repairs that keep the building’s equipment, utilities, and amenities functioning.
Corrective
Repairing a boiler, fixing a leaking faucet, or mending a broken air-conditioning unit are acts of ___ maintenance
Corrective
___ maintenance includes daily duties such as cleaning common areas, performing minor carpentry and plumbing adjustments, providing regularly scheduled upkeep of landscaping.
Routine
___ maintenance and ___ maintenance are similar in the sense that they both head off problems before they become expensive
Routine and preventative
Examples of ___ are repainting or replacing the carpets, gutting the interior and redesigning the space by erecting new walls, adding partitions, and revamping electrical systems.
tenant improvements
Title II of the ADA prohibits….
discrimination in commercial properties and public accomodations
The ADA requires that property managers ensure that people with disabilities have full and equal access to….
facilities and services
The property manager is responsible for determining whether a building meets the ADA’s ___ requirements
accessibilitiy
If a building is not in compliance with the ADA’s accessibility requirements, what must the property manager do?
Prepare & execute a plan for restructuring or retrofitting a building
___ involves answering the question: “what happens if something goes wrong?”
Risk management
___ protect owners against financial losses resulting from an employee’s criminal acts or negligence while performing assigned duties
surety bonds
IN IL, the policy type that tenants should ask for is ___, which is designed specifically to cover renters’ personal property
HO-4
What are the 2 methods used to determine the amount of a claim under an insurance policy?
1) depreciated cash value (aka actual cash value) of the damaged property
2) Current replacement cost
When property is not insured for what it would cost to replace it, but rather for what it was originally worth, what method was used to determine the amount of an insurance claim?
Depreciated cash value (actual cash value)
When property is insured for the replacement cost, what method was used to determine the amount of an insurance claim?
Current replacement
Which type of insurance is more expensive: full replacement cost or depreciated cost?
Full replacement
___ insurance provides coverage against losses such as theft, vandalism, and destruction of machinery
Casualty
What license is required to work as a property manager?
Broker
