Property Management Flashcards
Property Management
The administration of residential, commercial and/or industrial real estate. Property management typically involves the managing of property that is owned by another party or entity. Property managers are typically paid a fee and/or a percentage of the rent brought in for the property while under management.
-acts as the owner’s fiduciary in the day-to-day sale and leasing of the property
When to use a Property Manager?
For any income producing property:
-condo, co-op, rental building, commercial, retail, industrial property, single family home, luxury high-rise
Functions of a Property Manager
- Produce the greatest net return for the owner (best NOI for the property)
- Protect and increase the owner’s investment
When is a license required?
A property manager is required to have a license id they are working on behalf of more than one property owner
-not required for a salary employee for one owner
Management Agreement
A contract between the owner of a property and someone who agrees to manage it.
The Management Agreement is a contract, which typically contains the following:
In writing and signed
- Description of the property
- Management authority
- Length of agreement
- Reporting
- Management fees (3-20% of the rent roll)
- Accounting responsibilities (collect all rents and hold in trust account for the owner. Funds cannot be comingled and should be kept in a SEPARATE ACCOUNT)
- Requirements for insurance and risk management
- Owner’s responsibilities and objectives
- How and why the agreement can be terminated
Rent Roll
This document provides a list of all rents in the building and helps determine the total gross rent roll for the property
Listing of all of units in building
-An owner typically gives their sales agent a copy of the rent roll in order to understand what the Gross Rental Income is for the property
-The owner of a rental property will typically share the rent roll with the rental agent so they can gain a better understanding of comparables
Office Building Management Requirements for Property Managers
- Keep vacancies to a minimum
- Analyzed demographics to attract the proper tenants
- Negotiate leases
- Rent schedule
- Market to certain professions to best utilize space
- rearrange space to best meet tenant’s needs
Retail Management Requirements for Property Managers
- Understand the needs and desires of tenants
- Maintain common areas
Residential Management Requirements for Property Managers
- Tenant selection: credit checks, criminal background checks, previous landlord references, employment verification
- Maintenance
- repair
- Tenant eviction
Residential Management
Requirements for Property Managers
- Tenant selection: credit checks, criminal background checks, previous landlord references, employment verification
- Maintenance
- repair
- Tenant eviction
Obligations of Property Managers to Owner
- Goals must be the same with the property owner
- Preventive maintenance (ex. replacing filter, tightening a bolt)
- Corrective maintenance
- Be aware of trends in the market, pricing, amenities, population growth, governmental issues, zoning issues
- Provide periodic reports to the owner
Obligations of Property Managers to Owner
- Goals must be the same with the property owner
- Preventive maintenance (ex. replacing filter, tightening a bolt)
- Corrective maintenance
- Be aware of trends in the market, pricing, amenities, population growth, governmental issues, zoning issues
Preventative Maintenance
Keeping property and equipment in a good state of repair so as to minimize the need for more costly major repair work or replacement
Property Manager
An individual or company responsible for the day-to-day functioning of a piece of real estate.
-strives to produce greatest net return for owner
Resident Manager
A manager of a property who lives on-site.
Property Management Report
An accounting report issued periodically by the property manager to the owner outlining all income and expenditures for that accounting period.
Properties that typically require management services
condos, coops, apts, single family residences, mobile home parks, office buildings, shopping malls, industrial parks, farms
Institute of Real Estate Management (IREM)
offers property management courses
Net Operating Income (NOI)
Gross Income - Operating Expense = NOI
Budget
Gross Income - Operating Expense = NOI
- -> Operating Income: common charges, storage, other misc (like application fees), commercial laundry income, water and sewer billbacks
- -> Operating Expenses: Real estate taxes, labor and related
- -> Utilities & Services: electric, gas, water
- -> Total expenses
- -> Operating Income
- Typically the management fee in a condo building is a fixed amount
- In a rental property, the management fee will ne a percentage of the income collected
Capital Expense (CAPEX)
Expenditures creating future value. Incurred when a property owner spends money to upgrade a building in an effort to add value and/or extend the useful life of the building
Marketing Plan:
Plan developed by a property manager or broker that describes how rents will be maximized
The Market:
- Market activity
- Vacancy rates
- Competition
- Environmental
- Demographics
- Technology trends
- Supporting businesses, schools and infrastructure
- Zoning
- Governmental restrictions
- Forecasting
- Tenant analysis
- Tenant turnover
Property:
- Building
- Units price
- Property Value
- Competition
- Sales Force (advertising, budget etc)
Owner’s Objectives:
- Mission Statement
- Marketing
- Target Area
Financial Statement:
- Marketing program finances
- Cost advantages
- Proposed budgets
- Contingency Plan
Management Proposal:
- Description of property
- Contract period
- Management company’s responsibilities
- Timely reporting to owner
- Qualifications of the Management Company
- Management reports samples
Marketing Plan:
Plan developed by a property manager or broker that describes how rents will be maximized
The Market:
- Market activity
- Vacancy rates
- Competition
- Environmental
- Demographics
- Technology trends
- Supporting businesses, schools and infrastructure
- Zoning
- Governmental restrictions
- Forecasting
- Tenant analysis
- Tenant turnover
Property:
- Building
- Units price
- Property Value
- Competition
- Sales Force
Reporting
Monthly Report:
- Accounts Receivable Report
- Accounts Payable Report (shows what bills are to be paid. Includes: security deposits, vendors, copies of paid bills)
- Budget analysis
- Monthly variance report
Violation & Termination
- if property manager has a friend who wants to move in and wants to give him a better rate
- payment or kickback
- management can set how to terminate
Eviction
A legal proceeding by a lessor landlord to recover possession of real property.
Fiduciary
A person who on behalf of or for the benefit of another transacts business or handles money or property not the person’s own; such relationship implies great confidence and trust.
General Agent
Someone authorized to transact every kind of business for the principal.
Lessee
A person to whom property is rented under a lease.
Lessor
One who rents property to another under a lease.
Management Proposal
A document that sets forth the duties of the manager when employed by the owner.
Operating Budget
An amount of money set aside by the owner for a specific period for the property manager to manage the property effectively.
Planned Development Unit
A highly designed residential project that features relatively dense clusters of houses, which are usually surrounded by areas of commonly owned open space maintained by a nonprofit community association.
Risk Management
Controlling and limiting risk in property ownership.
Stabilized Budget
A forecast of income and expenses for a property, typically over a three to five year period.
Variable Expense
Property expenditures that vary depending of the operations of the property.
Corrective Maintenance
A maintenance task performed to identify, isolate, and rectify a problem with a property so that the property can be restored to an acceptable condition
Capital Reserve Budget
Money set aside by a property owner for long-term capital expenditures to a property
Skills required of a Property Manager
Supervising others
Handling landlord-tenant relations
Understanding general accounting principles
Understanding lease agreements with tenants
In most rental buildings, this is commonly found to be the largest expense for the building?
Real Estate Taxes
Which of the following expenses is typically related to the age of the building?
Building repairs
