Property Maintenance & Operations Flashcards
7 cards from real CGA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Property Maintenance & Operations flashcards as text
A building's HVAC system requires replacement of the compressor unit. How should an appraiser classify this expenditure?
Answer: Capital expenditure requiring depreciation analysis
Replacing a major mechanical component like a compressor is a capital expenditure that extends useful life and must be analyzed for depreciation purposes.
Which metric best measures the operational efficiency of a commercial property's maintenance program?
Answer: Operating expense ratio
The operating expense ratio (operating expenses divided by effective gross income) directly measures how efficiently a property's operations, including maintenance, are managed.
A property manager defers roof repairs to reduce current-year expenses. How does this practice affect a general appraiser's income approach valuation?
Answer: It overstates NOI, potentially inflating value unless a deferred maintenance adjustment is applied
Deferring necessary repairs artificially inflates current NOI; appraisers must deduct estimated deferred maintenance costs to reflect true stabilized value.
In appraising an older apartment complex, the appraiser notes that the plumbing system uses galvanized pipes with an estimated 5-year remaining useful life. This condition primarily represents:
Answer: Incurable physical deterioration
Short-remaining-life plumbing in an older building represents incurable physical deterioration when the cost to cure exceeds the value added.
A triple-net (NNN) lease tenant is responsible for property taxes, insurance, and maintenance. How does this structure affect the landlord's operating expense load?
Answer: The landlord's operating expenses are substantially reduced, increasing NOI
Under NNN leases, the tenant absorbs major operating costs, significantly reducing the landlord's expense burden and increasing net operating income.
When appraising a newly built industrial warehouse, which maintenance cost component is most likely to be minimal in the first year?
Answer: Structural repairs and major system replacements
Newly constructed buildings have new systems and warranties, making major structural repairs or system replacements unlikely in the first year of operation.
An appraiser reconstructing a stabilized expense statement for a multifamily property should treat extraordinary one-time repair costs by:
Answer: Spreading them over several years or excluding them as non-recurring
Stabilized expense statements normalize operations by excluding or amortizing non-recurring extraordinary costs that do not represent typical annual expenses.