CLP Property Evaluation & Analysis 3 — Questions and Answers
Question 1: A property achieves a physical occupancy of 95% but an economic occupancy of 88%. Which scenario BEST explains this discrepancy?
- Several units are vacant but listed at above-market rents
- Occupied units have significant concessions or delinquent residents (Correct answer)
- The property recently completed a major renovation
- Turnover costs are higher than industry average
Correct answer: Occupied units have significant concessions or delinquent residents
When physical occupancy exceeds economic occupancy, occupied units are not generating full expected revenue — typically due to concessions or unpaid rent.
Question 2: A leasing professional is asked to evaluate the 'loss-to-lease' on a property. What does this metric measure?
- Revenue lost due to vacant units
- Difference between market rent and actual contracted rent (Correct answer)
- Cost of concessions offered during lease-up
- Income lost from delinquent residents
Correct answer: Difference between market rent and actual contracted rent
Loss-to-lease is the difference between current market rent and the lower rent actually charged on in-place leases, representing unrealized revenue potential.
Question 3: Which of the following best describes the purpose of a SWOT analysis in property evaluation?
- Calculating the property's debt service coverage ratio
- Identifying Strengths, Weaknesses, Opportunities, and Threats relative to competitors (Correct answer)
- Measuring the physical condition of building systems
- Analyzing utility consumption patterns by unit type
Correct answer: Identifying Strengths, Weaknesses, Opportunities, and Threats relative to competitors
A SWOT analysis helps leasing professionals position the property competitively by identifying internal strengths/weaknesses and external opportunities/threats.
Question 4: A property manager is evaluating whether to approve a $50,000 amenity upgrade. If the upgrade is expected to increase average rent by $75/month across 100 units, what is the simple payback period in months?
- 4.2 months
- 5.6 months
- 6.7 months (Correct answer)
- 7.5 months
Correct answer: 6.7 months
Monthly revenue increase = $75 × 100 = $7,500; Payback = $50,000 / $7,500 = 6.67 months.
Question 5: When analyzing a potential lease-up property, which supply-side factor most directly threatens absorption projections?
- Rising interest rates reducing homebuyer demand
- New competitive deliveries scheduled in the same submarket (Correct answer)
- Declining household formation rates nationally
- Increased renter preference for suburban locations
Correct answer: New competitive deliveries scheduled in the same submarket
New competitive units delivering in the same submarket increase supply and directly compete for the same prospective residents, slowing absorption.
Question 6: A leasing professional reviews a property's trailing 12-month (T-12) operating statement. What is the PRIMARY purpose of analyzing T-12 data?
- To project future capital expenditure needs
- To understand actual historical revenue and expense performance (Correct answer)
- To calculate the current replacement cost of the property
- To determine the property's assessed tax value
Correct answer: To understand actual historical revenue and expense performance
A T-12 operating statement shows actual income and expenses over the past 12 months, providing a realistic baseline of property performance.
Question 7: In multifamily market analysis, what does the term 'shadow market' or 'shadow supply' refer to?
- Illegally operated rental units not reported to authorities
- Single-family homes and condos rented by individual owners competing with apartments (Correct answer)
- Vacant units held off-market by landlords awaiting higher rents
- Affordable housing units with income restrictions
Correct answer: Single-family homes and condos rented by individual owners competing with apartments
Shadow supply refers to single-family homes, condos, and townhomes rented by individual owners, which compete directly with multifamily communities for renters.
CLP Property Evaluation & Analysis 3
A property achieves a physical occupancy of 95% but an economic occupancy of 88%.
Which scenario BEST explains this discrepancy?