Real Estate Property Management Feasibility

Feasibility of Property Management

The Real Estate Economy

• The real estate economy is influenced by the general business economy
• The general business economy goes through cycles of expansion, recession, contraction, and revival
• Long-term movements of the general economy can be measured over 50 years or more
• Random changes in the economy can affect the real estate market

Factors Affecting the Value of Real Estate

• Government influences, such as policies and regulations, can affect the value of real estate
• The rental market is a key factor in determining the value of real estate
• A management plan is essential for property management, including market analysis, financial planning, and operating budget

Management Plan

• A management plan includes market analysis, financial planning, and operating budget
• Financial planning involves preparing financial reports, including income statements and cash flow statements
• An operating budget outlines projected income and expenses for a property
• Reserve funds are set aside for replacement expenditures

Financial Reports

• A five-year forecast is a critical component of financial planning
• Gross collectible rental income is the total potential rental income from a property
• Operating costs include expenses such as salaries, utilities, maintenance, and repairs
• Net operating income is the income remaining after operating costs are subtracted from gross collectible rental income
• Debt service includes payments on mortgages and other loans
• Cash flow is the net income remaining after debt service is subtracted from net operating income

Market Analysis

• Market analysis involves analyzing the regional market, neighborhood market, and local building codes and regulations
• Regional market analysis examines the overall real estate market in a region
• Neighborhood market analysis examines the local market conditions and amenities
• Boundaries and land usage, transportation, and utilities are also considered in market analysis

Property Analysis

• Property analysis involves evaluating the physical condition of a property, including the exterior, interior, and equipment
• Health or safety hazards are identified and addressed in property analysis
• Comparables are used to evaluate the value of a property
• Operating costs, capital improvement, and reserve funds are considered in property analysis

Key Point Review

• Key points to remember include the importance of market analysis, financial planning, and property analysis in property management
• A good management plan is based on thorough market research, financial planning, and property analysis

Property Management Emergence

• The primary reason for the emergence of property management as a profession was the need to manage properties after the Great Depression.

Property Manager's Role

• The primary role of a property manager is to develop and implement a management plan that maximizes the owner's profit.
• A property manager also acts as a liaison between the property owner and tenants.

Property Owner Types

• A slumlord is a property owner who extracts every possible dollar from the property without investing back into it.

Property Management Licensing

• Most states require property managers to hold a real estate license to protect the interests of both property owners and tenants.

Impact of Steel-Frame Building and Electric Elevator

• The development of steel-frame buildings and electric elevators led to the construction of taller buildings, requiring more sophisticated management.

Professional Organizations

• The Building Owners and Managers Association (BOMA) advocates for the interests of property owners and managers.
• The Institute of Real Estate Management (IREM) offers the Certified Property Manager (CPM) designation.
• The National Affordable Housing Management Association (NAHMA) advocates for the interests of property owners and managers involved in affordable housing.

Property Types

• Commercial property is used for business purposes, while residential property is used for living purposes.
• Office property is used for providing services, while retail property is used for selling goods.
• Research parks offer combinations of office and industrial space to tenants specializing in research and development.

Manufacturing

• Heavy manufacturing requires larger facilities and more specialized equipment than light manufacturing.
• Industrial parks provide more space for parking and landscaping.

Property Manager Types

• A third-party manager is a property manager who works for several owners, rather than just one.

Property Manager's Objective

• The primary objective of a property manager is to maximize the net income from the property for the owner.

Professionalism in Property Management

• The growth of professionalism in property management is due to the need for more sophisticated management techniques.

Codes of Ethics

• The primary purpose of Codes of Ethics in the property management profession is to promote ethical standards and professional conduct among property managers.

Property Improvements

• Improvements refer to the permanent attachments to land, either by nature or human hands.

Multifamily Developments

• The primary reason for the increase in multifamily developments is the rising cost of construction and land scarcity.

Facilities for the Aging

• The primary reason specialized property management is required for facilities for the aging is that elderly individuals have unique housing needs and legal considerations.