Exam 21: Managing Residential Rental Property

With a performance-based management contract, an asset manager's fees are tied directly to the rate of return earned by investors on the portfolio of managed properties relative to a benchmark. In private commercial real estate, the choice of benchmarks for performance is limited in large part to return indices provided by which of the following organizations?

Decisions to improve a property are less frequent than the decisions to maintain and repair it. A conversion of a property that produces a creative use of the structure that is different from its original purpose is more commonly referred to as a(n):

Which of the following classifications of property maintenance includes a program of regular inspections and care to avert potential problems.

In contrast to maintenance and repair expenditures, which are operating expenses, the improvement decision generally involves a capital expenditure meant to increase the value of the structure. Which of the following classifications of improvements calls for the restoration of a property to satisfactory condition without changing the floor plan, form, or style of the structure??

Property managers may choose at times not to perform ordinary maintenance at the time a problem is detected in order to boost short-run NOI. This type of maintenance is more commonly referred to as:

When property managers are looking to secure a mix of tenants for which "the whole is greater than the sum of its parts," or in other words a group of tenants that shares similar characteristics such that the experience of living together is mutually beneficial, they are seeking what is referred to as:

The lease is a contract between the owner and the tenant that transfers exclusive use and possession of the space to the tenant in return for rent or other consideration. In this arrangement, the owner is referred to as the:

A property management contract establishes an agency relationship between the manager and the owner. Considering that the management fee is often calculated as a percentage of gross income, this would seem to create an agency problem in that the agreement does not give managers the incentives to control operating expenses while they attempt to increase rental income. Though seldom the case, basing the property management fee on which of the following measures would, in theory, better align the interests of the owner and manager?

The real estate industry applies which of the following labels to individuals who are responsible for the day-to-day operations of the property.

Which of the following classifications of property maintenance includes the day-to-day cleaning and upkeep required to maintain value and tenants?

Someone shopping for a new suit at a department store is much more likely to stop at a nearby shoe store than a nearby bakery or drugstore. This scenario highlights the importance of which of the following determinants of the income-producing ability of the property?

Real estate asset managers perform certain functions that would not be expected of asset managers who deal with stock and bond portfolios. Which of the following functions would you expect both asset managers in real estate as well as stocks / bonds to perform?

Despite the magnitude of their real estate holdings, many non-real estate corporations have historically expended little effort to manage these assets effectively. Recently, the development of which of the following markets has helped to quell concerns related to this issue?

Suppose an owner is trying to decide whether or not to make improvements to her property. Given the following information, what would be the value added or potential loss if the improvements are undertaken? Current rent per square foot: $8.75, Anticipated rent per square foot: $14.50, Cost of improvements: $250,000, Square feet: 34,000.

In evaluating potential tenants for residential rental properties, a landlord may be interested in calculating the ratio of prospective rent to income for the applicant. Given the following information, calculate the rent to income ratio for the applicant. Applicant's Gross Annual Salary (Income): $45,000; Prospective Monthly Rent: $1,000; Applicant's Annual Income Tax and Benefit Payments: $7,650.

When property managers are looking to lease residential units to households whose prior history indicates a probability of long-term occupancy, they are seeking what is referred to as:

Leases are considered the engines that drive property values. Therefore, it should not be surprising that owners of commercial property may seek an independent leasing broker to focus on finding tenants to lease space. In exchange for their services, leasing brokers are paid a commission based on what percentage of the face amount of the lease?

The property manager works under a management agreement between the property owner and the property management firm. As compensation for his duties, the property manager will negotiate a management fee. Given the following information, calculate the dollar compensation to the property manager in year 1. Potential Gross Income of the property: $250,000; Vacancy and Collection Losses: 15%; Miscellaneous Income: $50,000; Management Fee: 3%.

When leasing nonresidential properties, owners would prefer to rent exclusively to high quality tenants. Such owners will tend to seek out companies whose general debt obligations are rated "investment grade" by one or more of the U.S. rating agencies. These potential tenants are more commonly referred to as:

The real estate industry applies which of the following labels to individuals who are responsible for the decisions that affect the physical, financial, or ownership structure of the property.