Chapter 27: Property Management Flashcards
(30 cards)
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What is the primary goal of property management?
To maximize the net operating income (NOI) of the property while preserving or increasing its value.
What is a property management agreement?
A contract between the property owner and the property manager outlining duties, authority, compensation, and responsibilities.
What must a property management agreement include?
Names of the parties, property description, term, manager duties, reporting requirements, and compensation.
What is the manager’s fiduciary duty?
To act in the best interests of the property owner with loyalty, care, and accountability.
What is net operating income (NOI)?
Gross income minus operating expenses, excluding debt service and capital expenditures.
What are common operating expenses in property management?
Maintenance, utilities, taxes, insurance, and management fees.
What is a budget in property management?
A financial plan that forecasts income and expenses over a specified period.
What are the three types of property management budgets?
Operating budget, capital reserve budget, and stabilized budget.
What is a capital reserve budget?
Funds set aside for major repairs, replacements, or upgrades.
What is the purpose of a stabilized budget?
To project typical income and expenses over a long-term period under stable conditions.
What are management reports?
Regular summaries of financial performance, occupancy, maintenance, and other operational data.
How often should management reports be provided?
Typically monthly, but frequency may be specified in the agreement.
What is preventive maintenance?
Routine upkeep performed to prevent larger issues and extend asset life.
What is corrective maintenance?
Repairs made after a problem has occurred.
What is a lease in property management?
A legal agreement giving a tenant the right to use property under specific terms.
What types of leases are common in property management?
Gross lease, net lease, percentage lease, and ground lease.
What is a gross lease?
The tenant pays a fixed rent and the landlord pays operating expenses.
What is a net lease?
The tenant pays rent plus some or all of the property’s operating expenses.
What is a percentage lease?
The tenant pays a base rent plus a percentage of business income.
What is a ground lease?
A long-term lease of land, usually 50+ years, where the tenant may build on the property.
What are CAM charges?
Common Area Maintenance fees shared by tenants for upkeep of shared spaces.
What is tenant retention?
Efforts made to keep tenants in place to reduce vacancy and turnover costs.
What are key factors in tenant selection?
Credit history, income verification, background checks, and rental history.
