Many lenders require that investors hire professional property management firms.
true
A real estate license is required when a person, for a fee, rents or leases or procures tenants for a property or controls the acceptance or deposit of rent from a resident of a single family residence. An exception to the licensing requirement exists for...
an apartment manager or an owner or owner's employee who leases the owner's real estate.
A broker is responsible for any __________________ activity and for all _____________ conducted by sponsored salespersons.
property management activity
advertising
A ____________ is someone who preserves the value of an investment property while generating income for the owners.
property manager
What are the responsibilities of a property manager?
-maintains the owner's investment
-ensures that the property produces income
-merchandise the property and control operating expenses to maximize income
-administration, marketing, and physical management
-securing and retaining suitable tenants
-collecting the rents
-caring for the premises
-budgeting and controlling expenses
-hiring and supervising employees
-keeping proper accounts and making periodic reports to the owner.
What is the best advertising when securing a management business for a property management?
word of mouth
**The property manager should be certain that the building owner has realistic income expectations and is willing to spend money on necessary maintenance
The first step in taking over the management of any property is to enter into a management agreement with the owner. Which two ways does this happen?
1. an agency contract in which operational liabilities are shared between the owner and the property manager working as a general agent.
2. an independent contractor agreement in which almost all the operational liabilities are borne by the independent contractor management company.
The property manager is charged with the same basic fiduciary duties are the listing broker, what are they?
-care, obedience, accounting, loyalty, disclosure
By law, a license holder who has the authority to bind a party to a lease under a power of attorney or a property management agreement, is a ________ to the lease.
party
The management agreement should be in writing and cover the following eight points, what are they?
1. Description of the property
2. Time period the agreement will cover
3. Definition of management reponsibilities; all duties listed and exceptions
4. Statement of owner's goals; indicate the owner desires the manager to accomplish withe the property; EX; cut expenses and minimize investment, program improving property's physical condition, etc.
5. Extent of manger's authority; what authority the manger has in such matters as hiring, firing, and supervising employees; fixing rental rates for space; making expenditures; and authorizing repairs.
6. Reporting; frequency and detail of the manager's periodic reports on operations and financial positions; monitor the manager's work and a basis for both the owner and manager to assess trends.
7. Management fee; fee can be based on percentage of gross or net income, a commission on new rentals, a fixed fee, or a combination.
8. Allocation of costs; which management expenses, such as office rent, office help, telephone, advertising, association fees, and Social Security will be paid by the manager or will be part of the property expenses paid by owner.
***Standardization of rates would be viewed as price-fixing; fees must be negotiated
How can a property manager protect the interests of the property owner?
-improving the reputation as well as the physical condition of the property
-guarding the owner from insurable losses
-helping the neighborhood and the community by offering the best possible residential and business environments
-keeping a check on all expenditures to ensure that costs are kept as low as possible for the results that must be accomplished
-adjusting the rental rate as necessary to produce the highest total income.
***The owner must be kept up to date on all matters of the policy; financial and operation
***A manager must keep in contact with others in the field, improving his/her knowledge of the subject and staying informed on current policies pertaining to the profession
A property manager should develop what before attempting to rent any property?
develop an operating budget
The operating budget of the property is based on what?
-anticipated revenues and expenses and must reflect the long-term goals of the owner.
-a manager should begin by allocating money for such continuous, fixed expenses as employee' salaries, real estate taxes, property taxes and insurance premiums.
The manager should budget money to cover the costs of remolding and adjustments. In a large-scale construction, the expenses charged against the property's income should be....
spread over several years.
Generally, a year-end income statement would be used as a base for budgeting expenses for the upcoming year.
true
The property manager should not be confused with an agent/broker. The property manager may use the service of a rental agency to solicit prospective tenants or collect rents, but the rental agency does not undertake the full responsibility of maintenance and management of the property.
true
What factors are rental rates based on?
-comparable rentals/buildings and the current level of vacancy in the property to be rented; long term
-short-term; supply and demand
-start with a detailed survey of the comparables; adjust the differences
-
In establishing rental rates for a property, a basic concern must be that...
in the long term, the income from the rentable space covers the fixed charges and operating expenses and also provides a fair return on the investment.
Apartment rental rates are stated in monthly amounts on a unit basis. Office and commercial space rentals are usually stated according to either the _______ or __________.
annual or the monthly rate per square foot of space.
If a high vacancy level exists, what is the last thing a property manager should do to fix the problem in identifying and correcting the problem?
lower rent.
Anytime the occupancy level exceeds __%, serious consideration should be given to raising the rents in an apartment house or office building---but only after what?
95%
conducting a survey of the competitive space available in the neighborhood.
A broker may sell a property and then have no further dealings with the purchaser, but a property manager must continue to deal with each tenant, and the manager's success greatly depends on what?
retaining sound, long-term relationships
When selecting prospective commercial or industrial tenants, a manager should be sure that each person "fits the space", this means what?
-the size of the space meets the tenants requirements
-the tenant will have the ability to pay for contracted space
-the tenant's business will be compatible with the building and the other tenants
-expansion space will be available if the tenant's business is likely to grow.
The residential landlord must provide the applicant with a printed or online notice of the landlord's tenant selection criteria when the landlord gives the applicant an _______________.
application form
What all does the landlord's tenant selection criteria notice include?
-grounds for which the application may be denied; applicant's criminal history, previous rental history, current income, credit history, or failure to provide accurate or complete info on the the application.
What must be done when the applicant is given the landlord's tenant selection criteria notice?
-applicant must sign an acknowledgment indicating that the notice was made available; online applications should have an online acknowledgment feature
The property manager must comply with all federal, state, and local laws, including the Fair Housing Act.
true
Several major state and federal laws affect the landlord in ________ to prospective tenants and in verifying rental history and credit info.
marketing
The federal Fair Credit Reporting Act, administered by the Consumer Financial Protection Bureau (CFPB), promotes what?
promotes accuracy, fairness, and privacy of info in the files of consumer reporting agencies.
If a property owner or his representative rejects an application for the rental of a property on the basis of info contained in the applicant's credit report, under the Fair Credit Reporting Act, what must be done if it was rejected based on a credit score or other factors?
-the applicant must be given the name of the credit reporting agency and must be told that she has a right to get a copy of the credit report.
-applicant must be told that the credit agency did not make the decision to reject the applicant.
-If the applicant was reject based on an applicant's specific credit score, that score, along with key factors that adversely affected the credit score, must be included in the rejection notice.
-If the applicant was reject on factors other than the credit score, the owner or owner's representative must either disclose the reason or tell the applicant that he has the right to submit a request for disclosure of the reason for rejection.
Enacted as an amendment to the FCRA, the Fair and Accurate Credit Transaction Act (FACTA), establishes standards to improve the quality of consumer credit information and instituted procedures to help protect consumers against identity theft. What are the two provisions of FACTA relevant to the business of property management?
1. prospective tenants can check the accuracy of the credit reports and get errors corrected before filing out rental applications; consumers may obtain one free credit report per year from all three major credit reporting bureaus: Experian, Equifax, and TransUnion.
2. proper disposal of consumer information.
What are the three major credit reporting bureaus?
Experian, Equifax, and TransUnion
online or phone
What is the "red flags" FACTA rule?
red-flags alert appears on credit reports to identify potential or detected identity theft; remains on credit files for 90 days if reason to believe consumer is or is about to be a victim of identity theft; if valid identity theft report, it stays on report up to seven years.
-***Rental owners or property manager have to show that they check IDs of applicants, verify IDs and follow up when they receive an address discrepancy notice from a consumer reporting agency.
Under the FTC privacy rule, companies that are significantly engaged in certain financial activities must make specific disclosures to a consumer before passing the consumer's personal information on to unaffiliated third parties.
true
If a property manager is asked to provide a tenant history and rental reference to another property manager, it would be prudent practice to obtain a written statement from the manager that the information provided will not be used for "____________" purposes.
credit granting
Before disclosing any info about a tenant to someone other than another rental housing owner or manager, a law enforcement officer, a consumer reporting agency, or a prospective employer of the tenant, the property manager must...
have written permission from the tenant.
Texas Privacy Policy Law states what?
Anyone who requires an individual to provide a SSN must adopt a privacy policy.
Texas Identity Theft Enforcement and Protection Act requires a business to implement and maintain procedures to protect and safeguard from unlawful use or disclosure any sensitive personal info in its possession. What info is defined and is not defined as sensitive personal information?
Sensitive personal info: person's first name or initial and last name in combination with one or more indentification number, driver's license number, mother's maiden name, or any financial data.
Non-sensitive personal info: address or phone number; public info
What is the U.S. PATRIOT Act? And what does it require of Apartment owners and managers?
What are the acceptable identify forms to use to check identity?
-requires apartment owners and managers to screen against a list of specially designated nationals and blocked persons--people identified with targeted foreign counties, terrorists, and international narcotics traffickers, and those engaged in activities related to the proliferation of weapons of mass destruction.
-Identity forms: SSN, Form I-551, Permanent Resident Card or "Green Card"; Form I-688, Temporary Residential Card; Form I-688a, Employment Authorization Card; and Form I-94, Arrival-Departure Record.
***The Individual Taxpayer Identification Number (ITIN) and the Matricula Consular cards are (Mexican ID cards) are not considered acceptable forms of ID.
Asking applicants to provide documentation of their citizenship or immigration status during the resident screening process violates the Fair Housing Act.
false; does not violate the FHA stated by HUD
For telemarketing, several laws (federal and state) apply. What are the three main ones?
no-call list
Junk Fax Prevention Act
CAN-SPAM Act.
The best way to minimize problems with rent collection is to...
make a careful selection of tenants in the first place; desire to have a high level of occupancy should not override good judgement in selecting tenants.
A property manager who accepts a late payment without charging late fees specified in the contract or reminding the tenant making the late payment that the payment must always be paid on time risks...
losing the legal right to later enforce the charging of late fees or to evict for a late payment.
In cases of delinquency, every attempt must be made to make collections without resorting to legal action.
true; what are some ways to collect without legal action????
Studies show that each tenant move-out costs an apartment community between _____ and ______, a cost that may take 10 or more years to recoup. It is good sense to keep good residents who are already paying rent. What are some ways to retain tenants?
$3,000 and $6,000
-follow up on move-in experiences because the renewal decision-making process begins at the time
-communicate, especially regarding service needs and maintenance updates, and follow up on completed work orders
-deliver a memorable recovery when bad experiences occur
-provide online communication with the rental staff or property owner
-return resident calls and emails immediately
__________ expenses are one of the largest expense categories on a property.
Maintenance
The owner and manager usually agree in advance on maintenance objectives.
true
To enable tenants to report property habitability emergencies, all landlords must...
provide tenants with a telephone number that will be answered 24hrs a day.
To protect the physical integrity of the property over the long term, what are the four types of maintenance that must be done?
1. Preventive maintenance: regularly scheduled activities such as painting and seasonal servicing of appliances and systems; preserves the long-range value of the property by warding off future repairs; both the most critical and the most neglected maintenance responsibility; failure leads to greater expense
2. Corrective maintenance: involves actual repair of the building's equipment, utilities, and amenities; ex; fixing leaky faucet, air-conditioning, etc.
3. Routine maintenance: day-to-day duties as cleaning, minor repairs, landscaping, etc.
4. Constructive alternations: tenant improvements; to the interior; recarpeting, redesigning, updating applicances.
One of the major decisions a property manager faces is whether to contract for maintenance services from an outside firm or hire onsite employees to perform such tasks. What factors should this decision be based on?
-size of the building
-complexity of the tenant's requirements
-time and expense involved, and
-availability of suitable labor
Tenant concerns, as well as federal, state, and local regulations, determine the extent of the manager's environmental responsibilities. What are the two environmental issues that are a main concern for the property manager?
1. the Occupational Safety and Health Administration (OSHA) asbestos regulations; property managers must know if there is asbestos and how to work with it
2. mold prevention and remediation; educating employees and residents; info sheet on mold prevention and cleaning should be attached to every lease and renewal.
Awareness of the purposes of insurance coverage and how to make best use of the many types of insurance available is part of what is called risk management. Risk management involves asking the question, "What will happen if something goes wrong?'. When considering the possibility of a loss, the property manager and owner must go be decide what to do by using ACTOR, which is?
A: Avoid it, by removing the source of risk, such as a swimming pool.
C: Control it, by installing sprinklers, fire doors, and other preventive measures
T: Transfer it, by taking out an insurance policy--or share it
Or
R: Retain it, by deciding that the chances of the event's occurring are too small to justify the expense of any other response.
When insurance is considered, the property is surveyed and recommendations are made. Who most likely has the final decision when dealing with insurance?
property owner
There is a growing trend for property owners or managers to require tenants to obtain renters insurance as a means for what?
transferring the risk and sharing it with the renter; can significantly reduce out-of-pocket expenses.
When a claim is made under a policy insuring a building or another physical object, there are two possible methods of determining the amount of the claim, what are they?
1. depreciated cost; actual cash value of the damaged property; value after depreciation
2. replacement cost; the actual amount a builder would charge to replace the damaged property.
Why would some owners/managers consider obtaining policies with a higher deductible?
Because the IRS allows a property owner to deduct losses suffered only up to the deductible portion of the insurance policy; also should result in a lower insurance premium
Fire and extended coverage insurance covers what?
coverage against direct loss or damage to property from a fire
Extended coverage covers hazards against windstorm, hurricanes, hail, explosion, riot, civil commotion, smoke, aircraft, and land vehicles
Business interruption insurance covers what?
insures against the actual loss of the property but do not cover loss of revenues from income property.
Interruption insurance, or rent-loss insurance covers the loss of income that occurs if the property cannot be used to produce income.
Liability insurance covers what?
covers the risks an owner assumes when the public enters the building; medical expenses for a person injured in the building due to landlords negligence
Workers' compensation insurance covers what?
provide medical care and a portion of lost wages to employees who have a work-related injury or illness and to protect employers from lawsuits resulting from workplace accidents
**Occupational and disability insurance is an alternative coverage for employers who choose not to carry workers compensation insurance.
Texas law requires an employer to carry workers' compensation insurance.
false
What does casualty insurance cover?
covers against theft, burglary, vandalism, and machinery damage.
Surety bonds cover what?
cover an owner against financial losses resulting form employees' criminal acts or negligences while carrying out their duties.
An apartment building burns to the ground. What type of insurance covers the landlord against the resulting loss of rent?
business interruption
Property manager Freida hires Albert as the full-time janitor for one of the buildings she manages. While repairing a faucet in one of the apartments, Albert steals a TV. Freida could protect the owner against liability for the type of loss by purchasing...
a surety bond
A property manager is offered a choice of three insurance policies: one has a $500 deductible, one has a $1,000 deductible, and the third has a $5,000 deductible. If the property manager selects the policy withe the highest deductible, which risk management technique is he using?
sharing
A property manager who enters into a management agreement as an agent to an owner is usually a
general agent
In preparing a budget, a property manager should set up what type of variable expense?