Property Management

Question 1

Ownership investment vs. Debt investment

Answer 1

Ownership - investor takes ownership in an asset, often called equities. The appreciate so are considered a better hedge on inflation.

Debt - such as a bond, is a loan to an investor.

Question 2

What is a sale-leaseback?

Answer 2

Sale-leaseback: A form of
financing in which the owner
of commercial or industrial
property sells the property and
leases it back from the buyer.
The seller of the property
has a leasehold interest, and
becomes a lessee

Question 3

What is the cash-on-cash ratio?

Answer 3

Cash-on-cash: the first year
before-tax cash flow divided
by the equity invested.

Question 4

What are the key portions of a property management agreement?

Answer 4

• In writing, specifying the exact duties and powers
• Legal description
• Description of responsibilities, including preparing a summary statement and day-to-day duties
• How to terminate the relationship, and the start date
• How the PM Is compensated

Question 5

What is a summary statement?

Answer 5

Summary statement: the key
portion of a property
manager’s statement of
operations, which summarizes
income and expenses

Question 6

What should a management plan include?

Answer 6

Market analysis to help establish a rental schedule, and an evaluation of supply and demand.

Budget planning, including operating expenses as well as vacancies, bad debts and capital improvements.

Question 7

What are the day-to-day functions of a property manager?

Answer 7

• Tenant relations
• Marketing
• Recordkeeping
• Maintenance
• Insurance

Question 8

What are the elements of a lease?

Answer 8

• In writing if it is for a fixed term (longer than a year is notarized)
• Signed by landlord
• When and what rent is paid (if not specified when, it’s due at the end of the rental period)
• Security deposit
• Renewal provision optional
• Entry and inspection

Local jurisdictions may add:
- Rent control

Question 9

What is the Uniform Residential Landlord Tenant Act?

Answer 9

Serves as the basis for landlord-tenant laws in most jurisdictions and doesn’t allow the tenant to sign away their rights.

Question 10

How can leased property be transferred?

Answer 10

Sale, Assignment, Sublease or Novation

Question 11

What happens on the sale of leased property?

Answer 11

Buyer must honor the lease to its conclusion.

Question 12

What is assignment? (Lease)

Answer 12

When a lease is assigned
from one tenant to another,
the original tenant (assignor)
retains secondary liability; the
new tenant (assignee)
assumes primary liability.

Question 13

What is a sublease?

Answer 13

Transfer of the leasehold estate for the period shorter than the unexpired term.

Question 14

What is a novation?

Answer 14

When one party to a contract withdraws and a new party is substituted, relieving the withdrawing party.

Question 15

How does a lease terminate (before the end of the term)?

Answer 15

• Surrender
• Breach of implied covenant of quiet enjoyment
• Breach of implied warranty of habitability
• Failure to pay rent
• Condemnation or destruction

Question 16

What is constructive eviction?

Answer 16

Constructive eviction: when
a landlord’s act (or failure to
act) interferes with the tenant’s
quiet enjoyment of the property,
or makes the property unfit for
its intended use, to such an
extent that the tenant is forced
to move out

Question 17

What is the implied warranty of habitability?

Answer 17

Implied warranty of habitability:
a warranty, implied by law in
every residential lease, that
the property is fit for habitation

Question 18

What is an unlawful detainer?

Answer 18

Unlawful detainer action:
a summary legal action to
regain possession of leased
property; a suit filed by a
landlord to evict a defaulting
tenant.

Question 19

What is a writ of posession?

Answer 19

If the court finds the tenant in
default, it may issue a writ of possession, which requires the tenant to move out peaceably or be forcibly removed by the sheriff

Question 20

Gross lease vs. Net Lease

Answer 20

Gross lease: rent is set at a fixed amount, landlord pays most or all of the operating expenses.

Net lease: Requires the tenant to pay some or all of the operating expenses in addition to the base rent. NNN requires all operating expenses.

Question 21

What is a graduated lease?

Answer 21

Provides periodic increases to the rent on a timeline, or cost-of-living index.

Question 22

What is a percentage lease?

Answer 22

Rent based on a percentage of the tenant’s monthly or annual gross sales.

Question 23

What is a ground lease?

Answer 23

Lease of land for the purposes of construction of a building.