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
Which of the following best describes a management fee as used in an appraisal income analysis?
Answer: A market-derived percentage of effective gross income reflecting professional property management
Management fees should reflect market norms—typically a percentage of EGI—regardless of whether the owner self-manages or uses actual costs that differ from market rates.
What is the primary purpose of a reserve for replacement account in property operations?
Answer: To accumulate funds for future replacement of short-lived capital items
Reserves for replacement set aside funds annually to cover the eventual replacement of short-lived components such as roofing, appliances, and HVAC systems.
A property's actual insurance premium is $12,000/year, but market surveys indicate comparable properties pay $8,500/year. How should the appraiser handle this discrepancy?
Answer: Use the market-derived $8,500 as the stabilized expense estimate
Appraisers use market-derived expense figures to reflect what a typical buyer would expect to pay, even if the current owner's costs differ.
Which of the following property types would most likely have the HIGHEST maintenance expense ratio relative to effective gross income?
Answer: A 40-year-old garden apartment complex with deferred maintenance
Older multifamily properties with deferred maintenance typically carry high maintenance expense ratios due to aging systems, required repairs, and intensive tenant turnover costs.
The Economic Age-Life method of estimating depreciation is most directly related to property maintenance because:
Answer: It reflects how well a property has been maintained through its effective age relative to total economic life
Effective age—the apparent age based on condition and maintenance—compared to total economic life directly reflects how maintenance quality impacts the depreciation calculation.
When performing a site inspection for appraisal purposes, which deferred maintenance condition would be considered MOST critical to identify for value impact?
Answer: Foundational cracking suggesting structural instability
Structural deficiencies such as foundational cracking represent major deferred maintenance with significant cost-to-cure and potential safety implications that materially affect value.
A property's net operating income (NOI) is $180,000 and its operating expenses are $120,000. What is the effective gross income (EGI)?
Answer: $300,000
EGI equals NOI plus operating expenses: $180,000 + $120,000 = $300,000.