Real Estate Investing Asset and Property Management 2 β Questions and Answers
Question 1: A landlord wants to minimize vacancy between tenants. Which strategy is most effective?
- Wait until a unit is vacant to begin marketing
- Begin marketing 60 days before lease expiration (Correct answer)
- Offer below-market rent to fill quickly at any time
- Require tenants to find their own replacements
Correct answer: Begin marketing 60 days before lease expiration
Starting marketing 60 days before a lease ends reduces vacancy gaps by attracting new tenants before the current one leaves.
Question 2: What does a gross lease mean for a commercial tenant?
- The tenant pays base rent plus all operating expenses
- The landlord covers all operating expenses within the rent (Correct answer)
- The tenant pays only property taxes and insurance
- Rent adjusts monthly based on gross revenue
Correct answer: The landlord covers all operating expenses within the rent
In a gross lease, the landlord collects a flat rent and pays all operating expenses such as taxes, insurance, and maintenance.
Question 3: Which metric best measures a property manager's effectiveness at controlling expenses?
- Gross rent multiplier
- Expense ratio (Correct answer)
- Loan-to-value ratio
- Debt service coverage ratio
Correct answer: Expense ratio
The expense ratio (operating expenses divided by gross income) directly shows how efficiently a manager controls costs relative to revenue.
Question 4: A tenant refuses to vacate after their lease expires. This situation is called a:
- Holdover tenancy (Correct answer)
- Periodic tenancy
- Month-to-month lease
- Tenancy at will
Correct answer: Holdover tenancy
A holdover tenancy occurs when a tenant remains in possession of a property after the lease term ends without the landlord's formal renewal consent.
Question 5: Which reserve account is used specifically to fund major capital improvements on a property?
- Operating reserve
- Capital expenditure reserve (Correct answer)
- Security deposit escrow
- Debt service reserve
Correct answer: Capital expenditure reserve
A capital expenditure (CapEx) reserve is set aside to pay for large, infrequent improvements like roof replacements or HVAC systems.
Question 6: An investor owns a 20-unit apartment building. Which management structure typically maximizes control and minimizes fees?
- Hiring a third-party property management company
- Self-managing the property directly (Correct answer)
- Assigning management to a passive partner
- Contracting a real estate agent to manage it
Correct answer: Self-managing the property directly
Self-managing eliminates management fees (typically 8β12% of rents) and gives the owner direct oversight of operations and tenant relationships.
Question 7: What is the primary purpose of a move-in/move-out inspection checklist?
- To determine a tenant's credit score
- To document property condition and protect against wrongful security deposit disputes (Correct answer)
- To set the rental price for the unit
- To screen applicants before approving their application
Correct answer: To document property condition and protect against wrongful security deposit disputes
A documented inspection checklist with photos establishes a baseline property condition, making it defensible to retain or return security deposit funds.
Real Estate Investing Asset and Property Management 2
A landlord wants to minimize vacancy between tenants.
Which strategy is most effective?