AMP Broker’s Exam: Property Management 1

Regional Market Analysis
Includes demographic and economic information in the area where the property is located. this information includes population statistics, income and employment data, a description of transportation facilities, and supply and demand trends.
Neighborhood Market Analysis
The major areas in the neighborhood market analysis are boundaries and land usage, transportation and utilities, economy, supply and demand, and neighborhood amenities and facilities.
Rent Control
Regulation by the state or local government agencies restricting the amount of rent landlords can charge their tenants. The primary purpose of rent control was to remedy high rents caused by the imbalance between supply and demand in housing.
Preventative Maintenance
Preserves the physical building and eliminates costly problems before major repairs become necessary
Corrective Maintenance
Fulfills the owner’s responsibilities to the tenant by keeping the building’s equipment, utilities and amenities functioning properly
Routine Maintenance
Includes routine housekeeping, such as maintenance of the common areas and grounds, and maintaining the physical cleanliness of the building itself
New Construction Maintenance
Occurs to meet the needs of a tenant, and could be something as simple as installing new carpeting or as complex as upgrading or remodeling the property to meet the tenant’s needs
Trust Accounts
Property managers are required to maintain escrow or trust accounts in which security deposits are placed. Laws vary by state, but usually these accounts must be separate from business and personal accounts. Tenants are usually informed of the bank and account number where their security deposits are located. State laws also regulate the disbursement of security deposits.
Return on Investment (ROI)
The ratio of the property’s net income after taxes (ATCF) to the money invested (equity) in the property. The ROI also may be computed on a before-tax basis.
Who must file the proper federal and state income tax reports with government agencies?
The property owner
Who is responsible for keeping the property habitable and for complying with local building and housing codes?
Owners
What portion of each mortgage payment can be deducted as an expense on the profit and loss statement?
The interest portion
Lease
An agreement that transfers exclusive possession and use of real estate from the landlord/owner/lessor to the tenant/lessee. This lease agreement can be oral or written.
Reversionary right
The owner’s right to retake the property on the expiration of the terms of the lease.
Leased fee interest
The lessor’s interest
Leasehold interest
The lessee’s interest
Covenant of quiet enjoyment
Implied covenant in which the lessor guarantees that the lessee has exclusive possession and the landlord will not interfere with the tenant’s possession or use of the property.
What are the provisions of a valid lease?
– Offer and acceptance
– Consideration
– Capacity to contract
– Legal objectives, and
– A description of the premises
Assignment
Leases can be assigned or subleased unless there is a clause in the lease forbidding it. A tenant who transfers all the leasehold interests assigns the lease.
Sublease
Created when a tenant transfers less than all the leasehold interests by subleasing them to a new tenant. In this arrangement, there are two landlord-tenant relationsihps.
Lease option
The tenant has the option to purchase the property at a specified price within a certain time. A portion of the monthly rental payment may be credited toward the purchase price.
Lease purchase
The tenant agrees to purchase the property at a specified price within a certain period, which is usually the end of the lease
Gross (or straight) lease
The tenant pays a fixed rental amount, and the owner pays all other ownership expenses for the property. The owner usually pays property taxes, insurance and maintenance, while the tenant pays for the utilities
Net lease
The tenant agrees to pay ownership expenses, usually utilities, property taxes, and special assessments.
Net-net lease (Double net)
The tenant agrees to pay ownership expenses, usually utilities, property taxes, and special assessments. Tenant pays for insurance as well.
Net-net-net lease (Triple net)
The tenant agrees to pay ownership expenses, usually utilities, property taxes, and special assessments. Tenant pays for insurance as well. Tenant pays for some agreed-on terms of repair and maintenance.
Percentage lease
Used for retail space. The tenant agrees to pay a fixed base rental fee plus a percentage of the gross income in excess of a predetermined minimum amount of sales. The percentage can also be computed from the first dollar of sales.
Sale-leaseback
The grantor sells the property to the grantee, and then leases it back.
Graduated lease
Used to attract tenants to a property that is difficult to rent. Allows periodic step-up of rent payments. Ex. $400/mo for the first two years, $450 for the next two years, and $500 for the final year.
Index lease
The rent is tied to an index outside the control of both the landlord and the tenant. Index leases contain an escalation clause. More common in times of inflation, when the property manager does not want to enter into long-term fixed rentals that would cause the value of the property to decrease.
Escalation clause
allows the lease payment to change based on the index used, for example, the consumer price index
Does death of the lessor or lessee terminate a lease?
No. Should the property be sold, the grantee takes the title subject to all existing leases and cannot make any changes until each lease expires, unless the leases indicate otherwise.
Why may a tenant be evicted?
– nonpayment of rent
– unlawful use of the premises
– noncompliance w/ health and safety codes
Actual eviction
When the landlord files suit for possession because the tenant has breached the lease
Constructive eviction
When the landlord breaches the lease and the tenant must leave the premises because they have become uninhabitable
Warranty of habitability
Requires the landlord to keep the property in good condition. This includes maintenance of common areas and equipment, providing utilities, and being in compliance with state and local codes.