Leasing & Property Operations Flashcards
6 cards from real REA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Leasing & Property Operations flashcards as text
What is 'operating expense ratio' (OER) and how is it used in property analysis?
Answer: Total operating expenses divided by effective gross income; measures operational efficiency
OER (total operating expenses ÷ EGI) measures what percentage of collected income is consumed by operating expenses, with lower ratios indicating greater operational efficiency.
What is 'economic occupancy' versus 'physical occupancy' in property management?
Answer: Economic occupancy measures rent collected relative to potential rent; physical occupancy measures leased space relative to total space
Physical occupancy is a space metric (% leased), while economic occupancy is an income metric (% of potential rent collected), accounting for free rent and delinquencies.
What is a 'right of first offer' (ROFO) clause in a commercial lease?
Answer: A tenant's right to receive the first offer from the landlord before adjacent space is leased to others
A ROFO gives the tenant the right to receive and consider the landlord's offer for adjacent space before it is marketed to outside parties.
What is a 'base year' expense stop in an office lease?
Answer: The landlord pays operating expenses up to the base year amount; tenants pay increases above that level
A base year stop sets the landlord's operating expense contribution at the actual expenses in a specified base year; tenants pay their pro-rata share of any annual increases above that baseline.
What does 'net effective rent' measure in commercial leasing?
Answer: The average annual rent after accounting for all concessions such as free rent and TI allowances
Net effective rent spreads the total lease value net of all concessions (free rent, TI, moving allowances) over the entire lease term to calculate true average annual rent.
In multifamily property operations, what is 'economic vacancy loss'?
Answer: Income lost due to physical vacancies, non-payment, and rent concessions combined
Economic vacancy loss captures all income leakage including physical vacancy, bad debt, concessions, and model units — all factors that reduce actual income below gross potential.