Financial & Budgeting Responsibilities Flashcards

A property management company charges a management fee of 6% of collected revenue. If the property collects $85,000 in a given month, what is the management fee?

Answer: $5,100

$85,000 × 0.06 = $5,100 management fee for that month.

Which of the following best describes a 'pro forma' budget in real estate?

Answer: A projected financial performance statement used for planning or investment analysis

A pro forma is a forward-looking financial projection used to estimate future income, expenses, and returns for a property.

An apartment property's break-even ratio is 75%. This means the property:

Answer: Needs 75% of gross potential rent to cover expenses and debt service

The break-even ratio shows what percentage of gross potential rent is needed to cover all operating expenses and debt service.

Under accrual accounting, when is rental income recognized?

Answer: When the rent is earned (during the rental period it covers), regardless of when collected

Accrual accounting records income when earned, not when received, which may differ from cash-based reporting.

A CAM manager needs to evaluate whether a proposed $50,000 renovation will be worthwhile. Which financial tool would BEST help estimate the return over multiple years?

Answer: Net present value (NPV) or return on investment (ROI) analysis

NPV or ROI analysis accounts for the time value of money and projects multi-year returns on a capital investment.

Which document summarizes all current leases at a property, including unit numbers, tenant names, lease terms, and rent amounts?

Answer: Rent roll

The rent roll is the primary document tracking all active leases, rental rates, and key lease dates for a property.

When a vendor invoice is received but not yet paid, it is recorded in which account?

Answer: Accounts payable

Accounts payable tracks amounts owed to vendors for goods or services received but not yet paid.