Property Management - Exam 1 - Chapters 1-5 Graded A+

Property Management - Exam 1 - Chapters 1-5 Graded A+ Chapter 1 Goals of the Property Manager 1. Achieve the objectives of the property owners; 2. Generate income for the owners; 3. Perserve and/or increase the value of the investment property. Development of the Property Management Profession Steel frame buildings and the electric elevator. Development of the suburban areas. Classification of real property 1.Residential 2. Commercial 3. Industrial 4. Special-purpose Chapter 2 Season Variations Weather, School - College housing, Seasonal - retired people head south. These are predictable. Cyclical Fluctuations Expansion; - 7 yr. Cycle, Take proceeds reinvesting. Recession; - Supply begins to surpass demand. Contraction; Revival; Lull. Management Plan The financial and operational strategy for the ongoing management of the property. Three factors when formulating management plan Regional and neighborhood market analysis; Specific property analysis; Analysis of an owner's objectives. Technical Oversupply Occurs when there are more units available than potential tenants. Economic Oversupply Reflects the fact that potential tenants cannot afford to pay the price of the available space. Chapter 3 Three basic relationships between manager and property manager 1. Employer-employee relationship 2. Formal fiduciary relationship (trust) 3. Principal-Agent Arrangement Employer-Employee Relationship The employee-manger is directly responsible to the officers of the owner-employer corporation or institution, which may be the principle occupant of the property. Formal Fiduciary Relationship (Trust) A trust is a device by which one person or institution transfers legal ownership of property to someone else to hold or manage for benefit of the third party. Principle Agent Relationship Between Principle (one who hires) and the agent (one who does the work). Written agreement creating this relationship is called the management contract; it empowers the property manager, as agent, to act on behalf of the owner, or principle, in certain institutions. General Agent Long term relationship. Gives agent the authority to execute contracts within a scope of time. Special Agent Limited scope of time. Fiduciary Duties Loyalty; Care; Obedience; Accounting; Disclosure. Elements of the management Agreement Identification of the parties and property; Period over which the contract is to run; Authority and responsibilities of manager; Responsibilities of the owner; Fees and leasing/sales commissions; Signatures of the parties. Take Over Procedure Minimum information (owner's name, address, phone, SS#, Tax ID #, Attorney and accountant contact info.) Lease Information - Manager must have list of all rental units, copies of leases, and schedule of rental rates. Accounts Payable - Manager and owner should discuss when certain bills and obligations are satisfied. To maintain Owner-Manager relations Give monthly reports; Ongoing contact. Owner's Responsibilities Payroll - Maintenance, security and supervision; Insurance - Employee and fidelity premiums; Payments on owner's behalf; Bookkeeping and auditing; Building expenses and repairs; Advertising for tenants; Management fees. Management Responsibilities Monthly reports and disbursements; Surety bonds; Handling funds; Authority to rent, operate, and manage premises; Expenditures; Marketing costs; Agent's control over personnel. Surety Bonds Is a type of insurance that protects against loss in the face of employee theft. Antitrust Issues All fee structures must be negotiated between the owner and the manager, and terms should be kept between the two negotiated terms. Chapter 4 Basic Principle of Marketing Know the product and the best source of new business is your present customer base. Civil Rights compliance. Marketing Activities Advertising campaign strategy and methods; Promotional efforts; Personal selling activities. Advertising Campaign Strategy The type of property; supply and demand; available financial resources. Signs Are the most effective and cheapest. Newspaper Advertising Classified and Display. Chapter 5 Types of Leases Estate for Years; Estate from Period to Period; Tenancy at Will; Tenancy at Sufferance; Gross lease. Estate for Years Definite beginning and end. Estate from Period to Period Month to Month. Tenancy at Will Can terminate at will. Must give 30 day notice in Oklahoma. Tenancy at sufferance Stay beyond lease. Gross Lease Tenant pays fixed rental amount. Owner pays other expenses - utilities, maintenance, mortgage, insurance, pay roll, property taxes. Net Lease Pay utilities and property tax. Net-Net Lease Pay utilities, property tax and insurance. Triple-Net Pay utilities, property tax, insurance, and maintenance. Except mortgage. Modified Gross Lease Chapman won't pay electric, all else same. Percentage Lease Percentage Gross sales. Recapture Clause-if tenant does not pay certain base amount, landlord can acquire base amount and recapture space. Statute of Frauds All contracts must be in writing. Covers, written, oral or implied leases. Basic Elements of the Lease Complete and legal name and signatures of both parties; description of the party; term of the lease; consideration or amount of rent; time and method of payments; use of premises; rights and obligations of both parties; and possession of the premises. Non-Compete Clause Certain regulations that prohibit the distribution of certain goods within a certain distance. Condemnation If landlord is condemned by government, they have right to terminate lease. Escalation Increase in lease, in relation to commercial properties stock prices increasing. Step up Clause Increasing payments annually or monthly in relation to inflation. Use something like CPI or LIBOR to adjust prices. Assignment Leasing all space. Subletting Part of space.