Real Estate Investing Property Management Operations 5 — Questions and Answers
Question 1: A tenant requests permission to have a service animal despite a no-pets policy. What is the legally correct response?
- Deny the request because the lease prohibits pets
- Grant a reasonable accommodation under the Fair Housing Act and cannot charge a pet deposit (Correct answer)
- Allow the animal but charge a refundable pet deposit
- Require the tenant to provide veterinary insurance for the animal
Correct answer: Grant a reasonable accommodation under the Fair Housing Act and cannot charge a pet deposit
Service and assistance animals are not classified as pets under the Fair Housing Act; landlords must grant reasonable accommodations and cannot charge pet fees for them.
Question 2: Which financial statement is most useful for understanding a rental property's monthly cash flow?
- Balance sheet
- Income and expense statement (profit and loss) (Correct answer)
- Capital expenditure schedule
- Depreciation schedule
Correct answer: Income and expense statement (profit and loss)
The income and expense statement shows monthly rental income minus operating expenses, directly revealing the property's cash flow performance.
Question 3: What is the function of an estoppel certificate in property management?
- It certifies that a property is free of environmental hazards
- It confirms tenant lease terms and occupancy status for a lender or buyer (Correct answer)
- It documents the condition of a unit at move-in
- It authorizes a rent increase under a lease
Correct answer: It confirms tenant lease terms and occupancy status for a lender or buyer
An estoppel certificate is signed by tenants to verify their lease terms, current rent, and any disputes—commonly required during property sales or refinancing.
Question 4: Which practice helps property managers comply with Fair Housing Act tenant screening requirements?
- Using different income thresholds based on applicant nationality
- Applying consistent, written, objective screening criteria to all applicants (Correct answer)
- Requiring co-signers only from applicants of certain backgrounds
- Advertising units in ways that appeal to specific demographic groups
Correct answer: Applying consistent, written, objective screening criteria to all applicants
Consistent, written screening criteria applied equally to all applicants is the best defense against Fair Housing discrimination claims.
Question 5: What is the typical timeframe for a property manager to return a security deposit after a tenant vacates in most US states?
- 7 days
- 14 to 30 days, depending on state law (Correct answer)
- 60 days
- 90 days
Correct answer: 14 to 30 days, depending on state law
Most states require landlords to return security deposits within 14 to 30 days of move-out, along with an itemized statement of any deductions.
Question 6: A self-managing investor with 10 units is considering hiring a professional property manager. At what fee structure is a PM generally considered cost-effective?
- Any fee level since professional management always adds value
- When the time saved and reduced vacancy losses exceed the management fee cost (Correct answer)
- Only when properties are in low-income areas
- When the investor owns more than 50 units
Correct answer: When the time saved and reduced vacancy losses exceed the management fee cost
Hiring a property manager is cost-effective when their expertise reduces vacancies, prevents costly mistakes, and frees the investor's time for higher-value activities that offset the fee.
Question 7: Which of the following best describes the 'gross potential rent' (GPR) of a property?
- Actual rent collected in the past 12 months
- Total rent income if every unit were occupied at full market rate with no vacancies or concessions (Correct answer)
- Net rental income after all operating expenses
- Rental income after accounting for vacancy and credit losses
Correct answer: Total rent income if every unit were occupied at full market rate with no vacancies or concessions
Gross potential rent represents the theoretical maximum rent income assuming 100% occupancy at market rates, serving as the starting benchmark for income analysis.
Real Estate Investing Property Management Operations 5
A tenant requests permission to have a service animal despite a no-pets policy.
What is the legally correct response?