Financial Aspects of Property Management PDF

5 Financial Aspects of Property Management Learning Objectives After completing this lesson, students should be able to… Contrast the way income and expenses are treated in cash-basis, accrual-basis, and modi- fied...

5 Financial Aspects of Property Management Learning Objectives After completing this lesson, students should be able to… Contrast the way income and expenses are treated in cash-basis, accrual-basis, and modi- fied cash-basis accounting Describe some of the advantages of using a specialized property management accounting software program Discuss the requirements of trust accounts and some of the more common rules imposed by states on the handling of trust funds Identify the most common operating expenses involved in income property management Explain what net operating income is and identify some of the things a property manager can do to increase it Discuss the benefits of preparing an annual operating budget Describe the income tax ramifications of owning income property and identify the four main types of tax deductions available to property owners Suggested Lesson Plan 1. Give students Exercise 5.1 to review the previous chapter, “Developing a Management Plan.” 2. Provide a brief overview of Chapter 5, “Financial Aspects of Property Management,” and review the learning objectives for the chapter. © 2021 Rockwell Publishing  Property Management Instructor Materials 3. Present lesson content: Accounting – Accounting methods – Accounting software Trust Funds and Bank Accounts – Trust account requirements – Trust account categories – Deposit insurance EXERCISE 5.2 Accounts and accounting Gross Income and Operating Expenses – Gross income – Operating expenses – Operating expense categories Net Operating Income – Increasing gross income – Decreasing expenses – Disposition of net operating income Cash Flow Preparing the Annual Operating Budget – Potential gross rental income – Estimating operating expenses EXERCISE 5.3 Projected net operating income EXERCISE 5.4 Analyzing a real property investment Financial Reports – Contents of financial reports – Monitoring expenses and revising budgets – Income and expense statement for tax purposes Income Tax Ramifications of Real Estate Ownership – Tax deductions available to rental property owners – Income tax on the sale of property EXERCISE 5.5 Tax deductions for rental property 4. End lesson with Chapter 5 Quiz. 2  Chapter 5: Financial Aspects of Property Management Chapter 5 Outline: Financial Aspects of Property Management I. Accounting A. An owner and manager must choose from three basic accounting methods 1. Cash-basis accounting: income is recorded when received and expenses are recorded when paid 2. Accrual-basis accounting: income is recorded when due and expenses are recorded when incurred 3. Modified cash-basis accounting: annual or semi-annual expenses are deb- ited monthly as they accrue, but income is recorded only when received 4. An owner who wants to change the accounting method used must obtain approval from the IRS B. Accounting software: software designed to handle accounting and generate financial reports for the owner 1. Property management software can generate monthly, quarterly, and an- nual reports; Schedule E for tax reporting; categories and subcategories for expenses; running totals of income and expenses; bank records; pay- roll and inventory records; and purchase orders and maintenance records II. Trust Funds and Bank Accounts A. Trust funds: all money that a manager handles on behalf of a client is consid- ered trust funds 1. Trust funds cannot be commingled with the manager’s own funds 2. State law usually requires trust funds to be held in a bank account labeled as a trust account a. Some management firms prefer a pooled trust account B. State license laws usually include detailed requirements for trust accounts, including how accounts are opened, who receives interest, how service charges are paid, and time limits for depositing funds C. Managers usually maintain three different trust accounts 1. Operating account: a checking account used for ordinary receipts and expenditures, into which the manager deposits the property’s rents and other income, and out of which he pays the operating expenses 2. Reserve fund account: an account, often interest-bearing, that is used to accumulate reserves to pay for capital expenditures (such as a roof replacement or new refrigerators for an apartment building) or major repairs 3. Security deposit account: used for tenant security deposits; state law may require payment of interest to tenants D. All bank accounts used for client funds should be federally insured; deposit in- surance may be required by the management agreement or state licensing law 3  Property Management Instructor Materials 1. The Federal Deposit Insurance Corporation (FDIC) insures all accounts up to $250,000 a. The $250,000 limit applies individually to each owner/client who has funds in a trust account (combined with other funds the individual has on deposit with that institution) 2. The name on the account must indicate that funds are held in a fiduciary capacity EXERCISE 5.2 Accounts and accounting III. Gross Income and Operating Expenses A. Gross income: the amount of money earned by the property before expenses have been paid 1. Gross income includes rent payments and income from any miscellaneous sourc- es (internet and cable TV, parking, storage, tenant services, vending machines, and utilities) B. Operating expenses: the costs of maintaining, operating, and managing an income property 1. Operating expenses do not include debt service, income taxes, or capital expendi- tures 2. Operating expense ratio: the percentage of effective gross income that represents the property’s operating expenses; this figure can be compared to industry aver- ages to determine management efficiency a. The operating expense ratio formula is: Operating expenses ÷ Gross income = Operating expense ratio 3. Expenses may be fixed or variable a. Fixed expenses: expenses that occur at regular intervals and that do not go up or down based on the occupancy rate b. Variable expenses: expenses that vary with the occupancy rate, or that do not occur every year C. Operating expense categories and subcategories should remain consistent for report- ing and budgeting 1. Property taxes include general real estate taxes and special assessments a. General real estate taxes are levied based on the value of the property, and are paid in two installments b. Special assessments are taxes levied to pay for a particular public improve- ment project that will benefit the assessed property; special assessments are usually paid in installments 2. Insurance includes hazard and liability insurance; premiums are usually charged annually, but may be paid monthly, quarterly, or in semiannual installments 3. Utilities include electricity, gas or heating oil, water and sewer, garbage and recy- cling, and sometimes internet and cable 4  Chapter 5: Financial Aspects of Property Management 4. Maintenance costs include groundskeeping, as well as the labor, supplies, and materials needed for cleaning, upkeep, and repairs a. The costs of ordinary repairs (corrective maintenance) to keep the property in good operating condition are considered operating expenses b. Repairs that add long-term value to the property are usually considered capi- tal expenditures, which are not operating expenses 5. Other expenses include security, marketing, legal fees, miscellaneous supplies and services, legal costs, management fees, and administrative costs IV. Net Operating Income A. Net operating income (NOI): the amount of money left over from gross income after paying the property’s operating expenses 1. The formula for NOI is: Gross income – Operating expenses = NOI 2. NOI can be used to measure the owner’s return on investment a. Return on investment (ROI): essentially the “interest rate” paid on the money that the owner has invested in the income property b. The formula for calculating ROI is: NOI ÷ Capital invested = ROI 3. NOI can also be used to estimate a property’s value B. Increasing gross income can be accomplished by increasing rent, improving oc- cupancy rates, increasing collection rates, adding leasable space, or increasing miscellaneous fees C. Another way to increase NOI is by decreasing expenses, such as property taxes, in- surance, utilities, and other services D. The property manager usually gives the full amount of the NOI to the owner each month; the management agreement may direct withholding of a certain amount for debt service and/or reserves V. Cash Flow A. Cash flow: the amount of spendable income generated by an asset after all of the expenses connected with it have been paid 1. The formula for calculating cash flow is: NOI – Debt service = Cash flow 2. Debt service: payments of principal and interest on the property’s mortgage loans B. A manager can increase cash flow by increasing NOI and by decreasing payments on debt service C. Cash flow can be used to pay for capital expenditures, reserves, or the owner’s per- sonal income taxes D. After-tax cash flow: cash flow after income taxes are paid on property’s income VI. Preparing the Annual Operating Budget A. Annual operating budget: a budget that sets out the property’s expected income and operating expenses for each month of the coming year 5  Property Management Instructor Materials 1. Incremental budgeting: a budget based on historical numbers that are updated to reflect changes in prices or other factors 2. Zero-based budgeting: budgeting used when a property has no past income or expense data; the budget relies on figures that are typical for similar properties in the same market B. The first step in preparing the operating budget is to estimate the gross income the property is likely to generate during the coming year from rents and miscellaneous sources 1. First determine the property’s potential gross income (PGI) a. Use contract rent for occupied units and market rent for vacant units 2. The manager uses a vacancy factor to reduce the property’s potential gross in- come to reflect the reality of vacancies and problems with rent collection; the factor is usually expressed as a percentage 3. After deducting the vacancy factor from PGI, add the potential miscellaneous income; the resulting figure is effective gross income (EGI): the amount of money that should be available to pay operating expenses for the year C. The second step in preparing an operating budget is to make detailed estimates of the operating expenses for the year, allocating a specific amount for each category of expense D. Subtract estimated operating expenses from projected income to arrive at projected NOI EXERCISE 5.3 Projected net operating income EXERCISE 5.4 Analyzing a real property investment VII. Financial Reports A. Financial reports are typically submitted to the owner on a monthly, quarterly, and annual basis, and may be referred to as cash flow reports, profit and loss statements, earnings statements, or statements of operations B. Reports summarize income and expenses that have actually occurred (not just those budgeted) C. The content and frequency of reports will be dictated by the terms of the property management agreement D. Most financial reports include a summary of operations, rent roll, list of owner con- tributions, statement of receipts and disbursements, reserve account report, budget comparison, and a narrative report of operations 1. The reports may be simple, using line items, to make budget comparison easier E. The budget comparison statement assists the manager in identifying significant dis- crepancies between budgeted and actual expenses, so that the manager can justify and/or revise some budgeted items F. The manager may also be responsible for preparing an annual income and expense statement for tax purposes, which is used to prepare the owner’s tax return 6  Chapter 5: Financial Aspects of Property Management VIII. Income Tax Ramifications of Real Estate Ownership A. There are four important tax deductions available to investment property owners 1. Depreciation: the loss in value caused by wear and tear over time a. Depreciation deductions account for aging, and wear and tear on buildings and equipment; land does not wear out, so only the portion of the property’s value attributable to the buildings is eligible for deduction b. The depreciation deduction is also known as the cost recovery deduction be- cause the annual deductions eventually allow the owner to “recover” the cost of the building c. The IRS determines the “life” of the property and the taxpayer can deduct a percentage of the property’s value every year of the property’s life d. For residential property placed into service after 1987, the depreciation pe- riod is 27.5 years; the depreciation period for nonresidential property is 39 years 2. Mortgage interest and points are completely deductible 3. Operating expenses (anything other than capital expenditures) are generally fully deductible 4. Operating losses from rental property (when annual expenses exceed annual in- come) are deductible for certain qualifying owners who actively participate in the management of the property a. Passive income: income that a taxpayer earns from an enterprise in which he doesn’t materially participate; rental income is generally considered passive income b. As a general rule, passive losses are only deductible from passive income c. If the owner materially participates in the property’s management, up to $25,000 in operating losses from rental property can be deducted from the owner’s ordinary income B. An owner must pay income tax on any gain from the sale of investment property 1. The amount of gain is determined by this formula: Net sales price – Adjusted basis = Gain (or loss) a. Net sales price (also called amount realized) is the property’s sales price mi- nus selling expenses b. To determine the adjusted basis, first figure out the initial basis: the amount of money the owner spent to acquire the property, which includes the purchase price plus closing costs, and any money spent on evaluating the purchase c. Add capital expenditures to the initial basis, and then subtract depreciation d. The final formula for adjusted basis is: Initial basis + Capital expenditures – Depreciation = Adjusted basis 7  Property Management Instructor Materials 2. The IRS classifies real estate as a capital asset, so any gain on the sale of real estate is a capital gain a. Short-term capital gain: a gain from the sale of a capital asset held less than a year; short-term gains are taxed at the investor’s regular income tax rate b. Long-term capital gain: a gain from the sale of a capital asset held for more than one year; the tax rate is lower for long-term capital gains EXERCISE 5.5 Tax deductions for rental property Exercises EXERCISE 5.1 Review exercise To review Chapter 4, “Developing a Marketing Plan,” read the following True/False questions aloud to students and have them jot their answers down on a piece of paper; discuss answers together. 1. Unlike the property analysis, the regional analysis and neighborhood analysis do not need periodic updating. 2. An acceptable management proposal becomes the management plan. 3. The property analysis looks at physical issues regarding the property, but does not address intangibles such as the efficiency of current management. 4. The analysis evaluating whether making a particular improvement to the property is worthwhile is usually found in the property analysis section of the management proposal. 5. The main purpose of zoning is to define neighborhoods. Answers: 1. FALSE. All parts of the management analysis need periodic review. 2. TRUE. Unless the owner decides not to hire the manager, the proposal becomes the plan (though often with changes). 3. FALSE. The property analysis includes a look at all aspects of operations, including management efficiency. 4. FALSE. As the name implies, the analysis of alternatives section usually contains an evaluation of whether a particular improvement is worth making. 8  Chapter 5: Financial Aspects of Property Management 5. FALSE. While zoning differences might serve to define neighborhood boundaries, the main purpose of zoning is to protect neighborhoods from the incursion of conflicting uses. EXERCISE 5.2 Accounts and accounting Match the term with its description. Cash Accrual Trust funds Operating Modified cash Reserve fund 1. This form of accounting records income when received and expenses when paid. 2. This form of accounting records income when received and expenses when paid— or, if not paid, when they accrue. 3. This type of account contains funds held on behalf of the owner. 4. This type of account contains rents and other money used to pay the property’s expenses. 5. This form of accounting records income when due and expenses when incurred. 6. This type of account contains funds used for capital expenditures. Answers: 1. CASH. This form of accounting records income when it’s received and expenses when paid. 2. MODIFIED CASH. This form of accounting records income when it’s received and expenses when paid—or, if not paid, when they accrue. 3. TRUST FUNDS. This type of account contains funds held on behalf of the owner. 4. OPERATING. This type of account contains rents and other money used to pay the property’s expenses. 5. ACCRUAL. This form of accounting records income when it’s due and expenses when incurred. 6. RESERVE FUND. This type of account contains funds used for capital expenditures. (It may also be used to accumulate funds to pay large annual bills.) 9  Property Management Instructor Materials EXERCISE 5.3 Projected net operating income The Cupertino is a 15-year-old four-unit apartment house. Write out on the blackboard, or project on a screen, the following items and amounts. Ask your students to decide which of these items are expenses and which are sources of income. What do the property’s income and expenses each total? What is the projected net operating income (NOI)? Rental income from four 1-bedroom units: $40,800 Property taxes: $15,600 Insurance: $1,000 Laundry room/vending machine $942 Janitorial $450 Parking spots $360 Common area utilities $900 Management fee $1,600 Vacancy factor: $3,200 Answers: Expenses: Property taxes: $15,600 Insurance: $1,000 Janitorial $450 Common area utilities $900 Vacancy factor $1,600 Management fee $3,200 Total expenses $22,750 Income: Rental income from four one-bedroom units: $40,800 Laundry room/vending machine $942 Parking spots $360 Total income $42,102 Income $42,102 Expenses – $22,750 Projected NOI $19,352 10  Chapter 5: Financial Aspects of Property Management EXERCISE 5.4 Analyzing a real property investment Discussion prompt: Ask your students whether the Cupertino discussed in the previous exercise seems like a good investment. Why or why not? Analysis: Whether the Cupertino is a good investment is arguable. There’s some net operating income, but not much. There is not enough to cover the owner’s debt service, certainly. In that sense the owner is losing money. In addition, no mention is made of reserves in this budget. If the building needs major repairs, the owner will have to come up with additional capital. However, a significantly appreciating rental property market would change the whole picture. If the market is heating up, that makes this investment look considerably better. Rents will soon rise and perhaps the owner could sell for a profit in a few years. EXERCISE 5.5 Tax deductions for rental property Ask your students which of the following are deductible for a real estate investor and which are nondeductible. 1. Depreciation 2. Payments of mortgage principal 3. Mortgage interest and points 4. Operating expenses 5. Capital expenditures 6. Net loss on the business for the year 7. Rent amounts from tenants who fail to pay 8. Rent amounts from units vacant due to refurbishment Answers: 1. DEDUCTIBLE. Generally, the investor depreciates residential rental property over 27.5 years. 2. NONDEDUCTIBLE. Instead, the IRS allows depreciation deductions. 3. DEDUCTIBLE. Mortgage-related costs are deductible. 4. DEDUCTIBLE. Operating expenses are deductible. 5. NONDEDUCTIBLE. Capital expenditures are used in calculating the property’s adjusted basis. They are not a deduction. 11  Property Management Instructor Materials 6. DEDUCTIBLE. This may be referred to as an operating loss. Generally, the IRS limits rental real estate activity losses to $25,000. 7. NONDEDUCTIBLE. This is not a loss; the investor has merely earned less income than otherwise. 8. NONDEDUCTIBLE. This is not a loss; the investor has merely earned less income than otherwise. 12  Chapter 5: Financial Aspects of Property Management Chapter 5 Quiz 1. Meyer records income as it is received. He 5. Mary owns an apartment building. She has an records small expenses when they’re paid, but operating trust account at Improvident Bank for larger periodic expenses like property taxes, containing $100,000 in deposits. She also has he records 1/12th of the annual amount each a capital reserve fund account with $100,000 month. He is using: in it and a security deposit account containing a) accrual-basis accounting $25,000 at Improvident Bank. She also has her b) cash-basis accounting personal savings account, with $50,000 in it, at c) double-book accounting Improvident Bank. If Improvident Bank fails, d) modified cash-basis accounting how much of Mary’s funds are NOT protected by Federal Deposit Insurance Corporation insurance? 2. Which of the following would need to be kept a) $25,000 in a trust account on behalf of a property man- b) $50,000 agement client? c) $175,000 a) Capital reserves d) Everything is covered b) Security deposits c) Tenant rent payments d) All of the above 6. Gross income equals: a) net income minus operating expenses b) operating expenses divided by net income 3. What is the best solution to the problem of hav- c) rental payments minus miscellaneous fees ing to operate many different trust accounts for d) rental payments plus miscellaneous fees multiple management clients? a) Place funds in the management firm’s busi- ness account 7. All of the following would be considered fixed b) Place funds in the manager’s personal ac- expenses, except: count a) appliance maintenance c) Place funds in a pooled trust account b) insurance premiums d) Refuse to handle any trust funds; that’s up c) janitorial service contract to the client d) property taxes 4. Steve’s client wants him to set aside $2,000 8. The city adds sidewalks to a neighborhood. per month toward annual property taxes and All properties within the neighborhood are $1,000 per month toward a replacement roof. assessed a one-time fee to pay for the project, The trust account that would hold these funds although the fee can be paid over a number of would be a/an: monthly installments. This describes: a) advance fee account a) a capital expenditure b) operating account b) a judgment lien c) reserve fund account c) a special assessment d) security deposit account d) general real estate taxes 13  Property Management Instructor Materials 9. A property’s gross income was $100,000 last 13. A retail space would rent for $2,000 per month year. Operating expenses were $40,000. The if it were currently on the market. However, it owner has invested $600,000 in the property. is in the tenth year of a ten-year lease, and the The owner’s net operating income is ____, and rent is only $1,500 per month. The _____ is the owner’s return on investment is _____. $2,000; the _____ is $1,500. a) 10%; $60,000 a) capital rent; contract rent b) $60,000; 6% b) contract rent; economic rent c) $60,000; 10% c) contract rent; market rent d) $140,000; 20% d) market rent; contract rent 10. Rachel is trying to wring more income out of a 14. Potential gross income (and potential miscel- property. She observes that she could generate laneous income) minus a vacancy factor equals: more income if she took the unit she uses as an a) cash flow office and made it available as a residential unit. b) effective gross income Which category of ways to increase income c) net operating income would this fit in? d) operating expenses a) Improving occupancy b) Increasing leasable space 15. A financial report may also be known as any c) Increasing miscellaneous fees of the following, except: d) Raising rents a) earnings statement b) operating budget 11. A single-family property has a net operating c) profit and loss statement income of $1,500 per month. The monthly d) statement of operations principal and interest payment for the owner’s purchase loan is $1,300 per month. The build- ing’s owner expects to pay $50 per month in 16. Which of the following would not be a typical income taxes on the income earned by the part of a property’s financial report? property. The property’s monthly cash flow is: a) Analysis of alternatives a) $150 b) List of owner contributions b) $200 c) Rent roll c) $250 d) Statement of disbursements d) $2,800 17. Which form of deduction available to rental 12. Bill is managing a newly-built property with no property owners is also known as a cost recov- past income or expense data, so he creates an ery deduction? operating budget by relying on data from com- a) Depreciation parable properties. This technique is known as: b) Mortgage interest a) accrual-basis budgeting c) Operating expenses b) cash-basis budgeting d) Operating losses c) incremental budgeting d) zero-based budgeting 14  Chapter 5: Financial Aspects of Property Management 18. Which of the following would be considered passive income? a) Dividends b) Interest c) Rental income d) Salary 19. Which of the following is least likely to qualify, for tax purposes, as a capital improvement? a) Electrical system upgrade b) Fresh paint job c) New pool d) Roof replacement 20. Raul owns a triplex that he paid $500,000 for, including closing costs. He finds that the building, which is currently valued at $320,000, depreciated $60,000 during his ownership. He made $10,000 in capital expenditures, in the form of a new roof. What is the adjusted basis for this property? a) $270,000 b) $450,000 c) $460,000 d) $550,000 15  Property Management Instructor Materials Answer Key 1. d) Modified cash-basis accounting dif- 8. c) A special assessment is a tax levied fers from cash-basis accounting in that only on properties that benefit from large periodic expenses are accounted a particular project, rather than on all for as they accrue, usually on a month- properties in a jurisdiction. ly basis. 9. c) Net operating income is gross income 2. d) Tenant rent payments, security depos- minus operating expenses, so start with its, and reserve funds are all funds that $100,000 gross income and subtract a manager holds on behalf of a client, $40,000 operating expenses to find and therefore must be treated as trust $60,000 net operating income. Divide funds. net operating income by the size of the investment to find the return on the 3. c) Many property management firms investment, so divide $60,000 NOI by keep a pooled trust account, rather the $600,000 investment to find a 10% than having to set up separate accounts rate of return. for all clients. 10. b) By converting space used for manage- 4. c) A reserve fund account is a trust ac- ment purposes to leasable space, a count used only to accumulate funds manager may be able to generate ad- toward capital expenditures or toward ditional income. large, infrequently-paid expenses (like property taxes). 11. b) Cash flow is net operating income mi- nus debt service, so start with $1,500 5. a) FDIC coverage insures a depositor’s NOI and subtract $1,300 principal and funds up to $250,000, but that’s the interest to find $200 in cash flow. (Af- combined value of all accounts at ter-tax cash flow would also subtract one bank. Since Mary’s accounts to- the $50 for income taxes.) tal $275,000, she would be left with $25,000 unprotected. 12. d) Zero-based budgeting relies on figures from similar properties in the same 6. d) Gross income consists of rental pay- market. It is used for brand-new prop- ments plus miscellaneous fees, such as erties. parking fees and coin-operated laundry fees. 13. d) Contract rent is the amount currently being charged under an existing lease, 7. a) Maintenance on appliances is a vari- while market rent is the amount that able expense; it varies according to would be charged if offered for lease occupancy, and the number and se- in the current market. verity of maintenance problems also varies. 16  Chapter 5: Financial Aspects of Property Management 14. b) To find effective gross income (EGI), start with potential gross income, subtract a vacancy factor, and add po- tential miscellaneous income. 15. b) An operating budget is a plan for future spending; a financial report is a summary of what has already hap- pened. 16. a) Analysis of alternatives is part of a management plan. By contrast, rent roll, statement of disbursements, and list of owner contributions are all in financial reports. 17. a) Depreciation deductions are also known as cost recovery deductions, since the deductions allow an owner to slowly “recover” the cost of a build- ing. 18. c) Rental income is passive income, in other words, income from an enter- prise in which the taxpayer doesn’t materially participate. 19. b) Capital improvements are items that add to a property’s long-term value, that usually fall under the scope of remodeling. Projects oriented toward preserving existing value, like a new coat of paint, aren’t capital improve- ments. 20. b) To find adjusted basis, start with initial basis (here, $500,000), add capital expenditures ($10,000), and subtract depreciation ($60,000), for a total of $450,000. The value of the building itself is not relevant. 17  Property Management Instructor Materials PowerPoint Thumbnails Use the following thumbnails of our PowerPoint presentation to make your lecture notes. 18 Chapter 5: Financial Aspects of Property Management 19 Property Management Instructor Materials 20 Chapter 5: Financial Aspects of Property Management 21 Property Management Instructor Materials 22 Chapter 5: Financial Aspects of Property Management 23 Property Management Instructor Materials 24 Chapter 5: Financial Aspects of Property Management 25 Property Management Instructor Materials 26 Chapter 5: Financial Aspects of Property Management 27 Property Management Instructor Materials 28 Chapter 5: Financial Aspects of Property Management 29 Property Management Instructor Materials 30 Chapter 5: Financial Aspects of Property Management 31 Property Management Instructor Materials 32 Chapter 5: Financial Aspects of Property Management 33 Property Management Instructor Materials 34 Chapter 5: Financial Aspects of Property Management 35 Property Management Instructor Materials 36 Chapter 5: Financial Aspects of Property Management 37 Property Management Instructor Materials 38 Chapter 5: Financial Aspects of Property Management 39 Property Management Instructor Materials 40 Chapter 5: Financial Aspects of Property Management 41