Real Estate Property Management Feasibility

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Questions and Answers

Which of the following characterizes the expansion phase in the business cycle?

Increasing economic activity, rising employment, and consumer spending (correct)

Decreasing economic activity and a decline in consumer spending

Increased availability of credit and investment opportunities

Rising interest rates and stock market volatility

At or just before the peak of the general business cycle, what usually happens in the economy?

Consumer spending decreases significantly

Unemployment reaches its lowest point

Inflation is at its lowest level

Production and GDP growth start to slow down (correct)

What was the primary reason for the emergence of property management as a profession?

The need to manage properties after the Great Depression (correct)

The increase in single-family homes after World War II

The growth of real estate investment trusts (REITs) in the 1980s

The development of steel-frame buildings and electric elevators

What is the primary role of a property manager as an 'economist'?

To develop and implement a management plan that maximizes the owner's profit Signup and view all the answers

What is the term used to describe a property owner who extracts every possible dollar from the property without investing back into it?

A slumlord Signup and view all the answers

What is the primary reason most states require property managers to hold a real estate license?

To protect the interests of both property owners and tenants Signup and view all the answers

What was the significant impact of the steel-frame building and electric elevator on the property management profession?

It led to the construction of taller buildings, requiring more sophisticated management Signup and view all the answers

What is the primary purpose of the Building Owners and Managers Association (BOMA)?

To advocate for the interests of property owners and managers Signup and view all the answers

Which professional organization offers the Certified Property Manager (CPM®) designation?

Institute of Real Estate Management (IREM) Signup and view all the answers

What is the primary focus of the National Affordable Housing Management Association (NAHMA)?

To advocate for the interests of property owners and managers involved in affordable housing Signup and view all the answers

What is the primary characteristic that distinguishes commercial property from residential property?

Commercial property is used for business purposes, while residential property is used for living purposes Signup and view all the answers

What is the primary difference between office property and retail property?

Office property is used for providing services, while retail property is used for selling goods Signup and view all the answers

What is the primary purpose of a research park?

To offer combinations of office and industrial space to tenants specializing in research and development Signup and view all the answers

What is the primary difference between heavy manufacturing and light manufacturing?

Heavy manufacturing requires larger facilities and more specialized equipment Signup and view all the answers

What is the main advantage of industrial parks compared to traditional industrial areas?

Industrial parks provide more space for parking and landscaping Signup and view all the answers

What is the term used to describe a property manager who works for several owners, rather than just one?

A third-party manager Signup and view all the answers

What is the primary objective of a property manager?

To maximize the net income from the property for the owner Signup and view all the answers

What is the primary reason for the growth of professionalism in property management?

The need for more sophisticated management techniques Signup and view all the answers

What is the primary purpose of Codes of Ethics in the property management profession?

To promote ethical standards and professional conduct among property managers Signup and view all the answers

What is the term used to describe the permanent attachments to land, either by nature or human hands?

Improvements Signup and view all the answers

What is the primary reason for the increase in multifamily developments like townhouses, condominiums, and cooperatives?

The rising cost of construction and land scarcity Signup and view all the answers

What is the primary reason why specialized property management is required for facilities for the aging?

Elderly individuals have unique housing needs and legal considerations Signup and view all the answers

Study Notes

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.

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Description

Assess the feasibility of property management by analyzing market trends, operating budgets, and regional market analysis. Evaluate the economic activity and seasonal variations to determine the optimal rent and price.