Property Management Latest 2023 100% Pass

Property Management Latest 2023 100% Pass Property Manager Someone who manages real estate for another person for compensation. Duties include collecting rents, maintaining the property, and keeping up all accounting. A good reputation is often the manager's best advertising. A manager who consistently demonstrates the ability to increase property income over previous levels, while meeting legal requirements and enhancing the property's attractiveness to tenants, should have little difficulty finding new business. Before contracting to manage any property, the professional property manager should be certain that the building owner has realistic income expectations. Necessary maintenance, unexpected repairs, and effective marketing all take time and money. In addition, most states have landlord-tenant laws that require the landlord-owner to keep the property repaired and make sure it complies with building codes. Through the agency relationship with the owner, the property manager becomes responsible for repairs and the building's condition. Three Main Roles of Property Manager -achieve the objectives of the property owners, -generate income for the owners, and -preserve and/or increase the value of the investment property. Possible Clients of a Property Manager -corporate owners, -apartment buildings, -owners of small rental residential properties, -homeowners associations, -investment syndicates, -trusts -owners of office buildings. Property Management Specialties Community Association Management The prevalence of homeowners and condominium associations combined with complex planning and development codes have placed new demands on property managers. Working as part of a team, property managers assist in providing a comprehensive array of services to volunteer boards. Many states now require at least a real estate license or an association management license for those who specialize in managing associations. Housing for Seniors Opportunities abound in managing housing for those age 55 and older, including federally assisted housing programs. In addition to marketing, managers of senior housing are often responsible for the operation of the facility, as well as housekeeping, meal service, social event planning, and medical emergency planning. When subsidized housing is involved, the property manager needs to be familiar with state and federal rules pertaining to eligibility requirements and income verification. Manufactured Homes Homes built in factories meeting HUD specifications are called manufactured homes or HUD-code homes. These homes may be placed on individually owned land, but more than a third are sited in communities. A tenant may rent only the "pad," the land on which the home is sited, or the home itself. Many communities, especially those in the sun belt states, are geared toward seniors; managers at these communities must be effective at building community spirit. Resort Housing Managing second-home and resort rentals presents specific challenges. A resort manager must be able to care for and maintain often-vacant properties and be able to attract and manage short-term tenants. Many such properties are located in high-risk areas for natural disasters such as hurricanes, so the manager must be able to prepare for an emergency as well as to work with insurance Management Agreement A contract between the owner of income property and a management firm or individual property manager that outlines the scope of the manager's authority. What a Management Agreement should include: -Description of the property. -Time period the agreement covers and specific provisions for termination. -Definition of the management's responsibilities. All the manager's duties should be specifically stated in the contract. Any limitations or restrictions on what the manager may do should be clearly stated. -Statement of the owner's purpose and responsibilities. The owner should clearly state what the manager is to accomplish. One owner may want to maximize net income, while another may want to increase the capital value of the investment. What the manager does depends on the owner's long-term goals for the property. The agreement should list the owner's responsibilities for management expenses, such as payroll, advertising, insurance, and management fees. -Extent of the manager's authority. This provision should state what authority the manager is to have in matters such as hiring, firing, and supervising employees; fixing rental rates for space; and making expenditures and authorizing repairs. Repairs that exceed a certain expense limit may require the owner's written approval. -Reporting. The frequency and detail of the manager's periodic reports on operations and financial position should be agreed on. These reports serve as a means for the owner to monitor the manager's work. They also form a basis for both the owner and the manager to spot trends that are important in shaping management policy. The state real estate commission usually will have regulations concerning reporting. -Compensation. The management fee or other form of compensation may be based on a percentage of gross or net income, a fixed fee, or some combination of these and other factors. The compensation provision of the agreement should state the base fee, as well as any leasing fees, supervision fees, or other commissions or compensations. -Al Management Plan A highly detailed plan that lays out the owner's objectives for a property, as well as what the property manager wants to accomplish and how, including all budgetary information. In preparing a management plan, a property manager analyzes three factors: the owner's objectives, the regional and neighborhood market, and the specific property. Occupancy, absorption rates, and new starts are critical indicators. The plan also includes a budgetary section on sources of revenue and anticipated expenses. While the management plan is a document for the present, it is forward-looking in determining the feasibility of a property owner's long-term goals for a specific property. Financial Reports - Operating Budget - A property's anticipated financial performance in the present and future. It gives the owner a sense of expected profit. -Cash Flow Report -A monthly statement that details the financial status of the property. Sources of income and expenses are noted, as well as net operating income and net cash flow. The cash flow report is the most important financial report because it provides a picture of the current financial status of a property. - Income - Income includes gross rentals collected, delinquent rental payments, utilities, vending machine proceeds, contracts, late fees, and storage charges. In some properties, there is 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 gross collectible, or billable, rental income. Any losses from uncollected rental payments or evictions are deducted from total gross income to arrive at net operating income. - Expenses - A property will incur both fixed and variable expenses. Fixed expenses are those that remain fairly predictable, even though they may increase or decrease somewhat, such as employee wages and other administrative expenses, utilities, and other basic operating costs. Variable expenses may be recurring or nonrecurring and can include capital improvements, building repairs, and landscaping. -Cashflow - Cash flow is derived as shown below. The entry for "debt service" in the third equation includes any mortgage payments on the property. Gross rental income + other income - losses incurred = total income Total income - operating expenses = net operating income Net operating income - debt service - reserves = cash flow -Profit and Loss Statement - A general financial picture based on the monthly cash flow rep Considerations when establishing rent: -The rental income must be sufficient to cover the property's fixed charges and operating expenses. The rental income must provide a return on the owner's investment. -The rental rate should be comparable with prevailing rates in comparable buildings in the area; it may be slightly higher or slightly lower, depending on the desirability of the property. -The current vacancy rate in the property is a good indicator of how much of a rent increase might be possible. A building with a low vacancy rate is a better candidate for an increase than one with a high vacancy rate. -A rental rate for residential space is usually stated as the monthly rate per unit. Commercial leases—including office, retail, and industrial space rentals are usually stated according to either annual or monthly rates per square foot. Marketing and Advertising -To ensure that a property generates income, the property manager must attract the best tenants. The marketing strategy must take into consideration the property itself, the supply and demand in the area where the property is located, and the amount of money available for advertising. -All advertising and promotional activities must comply with federal, state, and local nondiscrimination laws. The content cannot market to one protected class, such as race, color, religion, sex, national origin, familial status, or disability. To ensure that a property generates income, the property manager must attract the best tenants. -Advertising methods are numerous and include internet sites and social media, newspapers, brochures, radio, television, and direct mail. -A cost-benefit analysis helps a property manager assess whether a particular advertising method worked to attract new tenants. Property marketing expenses are usually figured on a cost-per-prospect-per-lease basis. For example, if a three-bedroom apartment rents for $1,500, is typically viewed by 10 prospects before it is leased, and a single newspaper advertisement is the only marketing, an $800 newspaper ad would cost $80 per prospect. The internet has significantly expanded a property manager's ability to reach consumers. Online apartment vacancy listing sites include , , , , , , and . -Because property management firms are often known by reputation, it is important for a firm to maintain good public relations. One way to cultivate public relations is through community involvement and charitable giving. Firms can also write and issue public service announcements (PSAs) or press releases regarding special projects. These announcements can attract Calculating Monthly Rent per Square Foot - Commercial Only Calculating Monthly Rent per Square Foot (Commercial) Determine the total square footage of the rental premises (generally floor space only). 50 feet × 30 feet = 1,500 square feet Find the total annual rent. $2,500 per month × 12 months = $30,000 per year Divide the total annual rent by the total square feet to determine the annual rate per square foot. $30,000 ÷ 1,500 square feet = $20 per square foot Convert the annual rate to a monthly rate. $20 ÷ 12 months = $1.67 per square foot (rounded to nearest cent) Maintaining Good Relationships with Tenants An effective property manager establishes a good communication system with tenants—and prospective tenants. Maintenance and service requests must be attended to promptly, and all lease terms and building rules must be enforced consistently and fairly. A manager who fails to treat all tenants the same in terms of rent collection and enforcement of lease terms or rules and regulations will create ill will among tenants and might even be violating fair housing laws. A good manager is tactful and decisive, and acts to benefit both owner and occupants. The property manager must be able to address residents who do not pay rent on time or who violate building regulations. When one tenant fails to follow the rules, the other tenants often become frustrated and dissatisfied. Careful recordkeeping shows whether rent is remitted promptly and in the proper amount. Records of all lease renewal dates should be kept so that the manager can anticipate a lease expiration and retain a good tenant who might otherwise move when the lease term ends. Maintaining Properties Keeping the property in good condition involves the following three types of maintenance: -Preventive -Repair or corrective -Routine Preventative Maintenance Regularly scheduled activities such as painting and seasonal servicing of appliances and systems. Preventive maintenance preserves the long-range value and physical integrity of the building. This is both the most critical and the most neglected maintenance responsibility. Failure to perform preventive maintenance invariably leads to greater expense in other areas of maintenance. Corrective Maintenance Actual repairs that keep the building's equipment, utilities, and amenities functioning. Repairing a toilet, fixing a leaky faucet, and replacing a broken air-conditioning unit are acts of corrective maintenance. Routine Maintenance Day-to-day duties - performing minor carpentry and plumbing repairs, and providing regularly scheduled upkeep of heating, air-conditioning, and landscaping. Tenant Improvements - Commercial and Industrial Propeties Alterations to the interior of a building to meet the functional demands of the tenant. Also known as build-outs. Building Related Illness (BRI) A clinically diagnosed condition that can be attributed directly to airborne building contaminants. Symptoms include asthma, hypersensitivity, and some allergies. Building-related illness (BRI) is an illnesses that is more prevalent today because of energy efficiency standards used in construction that make buildings more airtight with less ventilation. Sick Building Syndrome (SBS) SBS is more typical in an office building, and symptoms include fatigue, nausea, dizziness, headache, and sensitivity to odors. Often, increasing ventilation or replacing interior features, such as carpeting, can solve air quality problems. Sick building syndrome (SBS) is an illnesses that is more prevalent today because of energy efficiency standards used in construction that make buildings more airtight with less ventilation. ADA - Title I and Title III -Title I provides that any employer of 15 or more employees must adopt nondiscriminatory employment procedures. In addition, an employer must make reasonable accommodations to enable an individual with a disability to perform essential job functions. - Title III, which prohibits discrimination in commercial properties and public accommodations. ADA requires that companies ensure that people with disabilities have full and equal access to facilities and services The property manager typically is responsible for determining whether a building meets ADA accessibility requirements. The property manager also must prepare a plan for retrofitting a building that is not in compliance when removal of existing barriers is readily achievable and can be performed without much difficulty or expense. Some tax advantages may be available to help offset the expense of ADA compliance. ADA experts may be consulted, as well as architectural designers who specialize in accessibility issues. Equal Credit Opportunity Act (ECOA) The Equal Credit Opportunity Act (ECOA) prohibits a lender from denying a loan based on a person's race, color, religion, national origin, sex, marital status, age, or receipt of public assistance. The ECOA affects the property manager in several ways. A manager should use the same lease application for every applicant. If a manager requires a credit report from one applicant, the manager should require credit reports from all applicants. The manager should be consistent in evaluating the income and debt of applicants and in determining whether to rent to an applicant. A complete copy of the law can be found at Fair Housing Act The Equal Credit Opportunity Act (ECOA) prohibits a lender from denying a loan based on a person's race, color, religion, national origin, sex, marital status, age, or receipt of public assistance. The ECOA affects the property manager in several ways. A manager should use the same lease application for every applicant. If a manager requires a credit report from one applicant, the manager should require credit reports from all applicants. The manager should be consistent in evaluating the income and debt of applicants and in determining whether to rent to an applicant. Risk Management Evaluation and selection of appropriate property and other insurance. In considering the possibility of a loss, the property manager must decide whether it is better to: -avoid it by removing the source of risk (e.g., a swimming pool may pose an unacceptable risk); -control it by preparing for an emergency before it happens (by installing sprinklers, fire doors, and security systems); -transfer it by shifting the risk onto another party (by taking out an insurance policy) -retain it by deciding that the chances of the event occurring are too small to justify the expense of any other response (an alternative might be to take out an insurance policy with a large deductible, which usually is considerably less expensive). Renter's Insurance The property manager should notify tenants that they must obtain renter's insurance, known as HO-4, in order to protect their personal belongings. The real estate owner can only insure what is owned (i.e., the building); the owner of the building cannot insure the personal property of tenants. Residential tenants need an HO-4 or renter's policy to insure their personal property. Business tenants can obtain their own business or commercial policy. Types of Insurance Common types of coverage available to income property owners and managers include the following: -Fire and hazard. Fire insurance policies provide coverage against direct loss or damage to property from a fire on the premises. Standard fire coverage can be extended to include other hazards, such as windstorm, hail, smoke damage, or civil insurrection. -Flood. Flood insurance is always a separate policy from home, rental, or building insurance policies. A flood insurance policy is available to any property located in a community participating in the National Flood Insurance Program (NFIP). It covers flooding caused by heavy rains, melting snow, inadequate drainage systems, or failed levees or dams. Consult -Consequential loss, use, and occupancy. Also known as loss of rent or business interruption insurance, consequential loss insurance covers the results, or consequences, of a disaster. Consequential loss can include the loss of rent or revenue to a business that occurs if the business's property cannot be used. -Contents and personal property. This type of insurance covers building contents and personal property during periods when they are not actually located on the premises. -Liability. Public liability insurance covers the risks an owner assumes whenever the public enters the building. A claim paid under this coverage is used for medical expenses incurred by a person who is injured in the building or on the property as a result of the owner's negligence. Claims for medical or hospital payments for injuries sustained by building employees hurt in the course of their employment are covered by state laws known as workers' compensation acts. -Casualty. Casualty insurance policies include coverage against theft, burglary, vandalism, and machinery damage, as well as health