Real Estate Investing Asset and Property Management 3 β Questions and Answers
Question 1: Under a triple net (NNN) lease, which expenses does the tenant typically pay?
- Only base rent
- Base rent plus property taxes, insurance, and maintenance (Correct answer)
- Base rent plus landlord's mortgage payment
- Only utilities and janitorial costs
Correct answer: Base rent plus property taxes, insurance, and maintenance
In a NNN lease, the tenant pays base rent plus the three 'nets': property taxes, building insurance, and maintenance costs.
Question 2: A property manager discovers that a unit's HVAC system needs $8,000 in repairs. The correct funding source is:
- Current month's rent collections
- Capital expenditure reserve (Correct answer)
- Security deposit fund
- Operating reserve for routine expenses
Correct answer: Capital expenditure reserve
Major system repairs like HVAC are capital expenditures that should be funded from the CapEx reserve, not monthly operating cash flow.
Question 3: Which of the following is considered a Fair Housing Act protected class under federal law?
- Source of income
- Marital status
- Sexual orientation
- National origin (Correct answer)
Correct answer: National origin
The federal Fair Housing Act protects seven classes: race, color, national origin, religion, sex, familial status, and disability.
Question 4: What does the term 'vacancy rate' represent in property management?
- The percentage of units not currently rented (Correct answer)
- The ratio of maintenance costs to total units
- The average time a unit sits vacant after a repair
- The number of tenant turnover events per year
Correct answer: The percentage of units not currently rented
Vacancy rate is calculated as vacant units divided by total units, expressed as a percentage, and directly impacts gross rental income.
Question 5: A property manager collects a $2,000 security deposit. Where must this typically be held?
- In the property manager's personal bank account
- In a commingled operating account
- In a separate trust or escrow account (Correct answer)
- Invested in a money market fund for the owner's benefit
Correct answer: In a separate trust or escrow account
Most states require security deposits to be held in a separate trust or escrow account to protect tenant funds from being used for operations.
Question 6: Which lease clause allows a landlord to raise rent during a lease term if property taxes increase?
- Escalation clause (Correct answer)
- Subordination clause
- Option to renew clause
- Holdover clause
Correct answer: Escalation clause
An escalation clause allows rent adjustments during the lease term based on increases in specified costs such as taxes, insurance, or a price index.
Question 7: What is the most common reason investors hire professional property managers despite the added cost?
- To avoid paying property taxes
- To leverage expertise and time savings on multi-unit portfolios (Correct answer)
- To eliminate maintenance costs entirely
- To avoid filing annual tax returns on rental income
Correct answer: To leverage expertise and time savings on multi-unit portfolios
Professional managers bring systems, legal knowledge, and vendor networks that save time and reduce costly mistakes, especially valuable as a portfolio scales.
Real Estate Investing Asset and Property Management 3
Under a triple net (NNN) lease, which expenses does the tenant typically pay?