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CAS Knowledge Check: Part 1

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CAS Basics

1. What information do you need in order to complete a financial analysis on a property?

Reveal answer

Over 1/3

2. When doing an financial analysis, why do you need to identify the GPR first?

Reveal answer

All other income & expenses are measured and evaluated as a percentage of GPR

3. What are the three primary types of income you will look for/calculate?

Reveal answer
  • Effective Gross Income (EGI)
  • Net Operating Income (NOI)
  • Cash Flow (CF)

4. What is a Chart of Accounts?

Reveal answer

A list of accounts to which revenue and expenses are posted and show up on the General Ledger

5. What is used to generate an Income Statement?

Reveal answer

Entries in the General Ledger

6. List some benefits of minimizing financial loss.

Reveal answer
  • Increases the financial success of a property
  • Improves property performance
  • Makes your job easier

7. What are the main types of financial loss you should work to prevent?

Reveal answer
  • Vacancy loss
  • Offline and nonrevenue units
  • Bad debt
  • Concessions and discounts

8. During the rent collection process, what things should you consider before occupancy?

Reveal answer
  • The screening process
  • Rent collection policy
  • Inclusion of the policy in the lease, orientation materials, etc.

9. During the rent collection process, what is the purpose of resident communication efforts?

Reveal answer

To facilitate the rent collection process

10. Why would you want to create a buffer for rent collection?

Reveal answer
  • To help you remain on good terms with residents
  • To ensure timely and complete payments

Managing Expenses

11. What are some characteristics of Variable Expenses?

Reveal answer
  • Vary as conditions change
  • Many are associated with occupancy

12. What are Capital Expenses?

Reveal answer

Costs for large improvements that have an economic useful life beyond one year

13. Describe a Cost Benefit Analysis.

Reveal answer

Process of weighing a potential expense against a potential benefit

Budgets

14. What is the most important thing to keep in mind when developing a budget?

Reveal answer

The owner’s property objectives and investment goals

15. What are the steps to the budget development process?

Reveal answer
  • Identify goals
  • Gather Information
  • Assign numerical values

16. When would you develop Rehab or Renovation budget?

Reveal answer

When a property is being rehabbed or undergoing retrofitting/modernization

17. What are the three tips to developing budgets covered today?

Reveal answer
  • Be prepared
  • Use historical numbers
  • Seek input

Managing Budgets

18. What is Extrapolation/Annualization?

Reveal answer

Estimating future information by extending known information

19. How do you analyze variances?

Reveal answer
  • Compare budget to actual numbers
  • Look at events on the property or in your submarket or region

20. Are increased expenses favorable or unfavorable variances?

Reveal answer

Unfavorable expenses

21. Once you’ve analyzed and can explain variances, what should you do next?

Reveal answer

Determine what, if any, action to take.

Performance Measurement

22. What is the benefit to the investor resulting from an investment?

Reveal answer

Return; the financial benefit

23. What is the purpose of measuring performance?

Reveal answer

Shows if goals are met and drives investment decisions

24. If a down payment is $200,000 and the cash flow generated is $20,000, what is the Cash-on-Cash Return?

25. Does a lower cap rate indicate lower or higher value?

Reveal answer

Higher value

26. What type of property valuation approach would you use if there are several similar properties in the area that have recently sold?

Reveal answer

Sales Comparison Approach

27. If you increase the NOI by $24,000 and the cap rate is 6%, how much value are you adding to the property?

Reveal answer

$400,000

Perform a Property Evaluation

28. What attributes affect the value of a property?

Reveal answer
  • Supply and Demand
  • Highest and Best Use
  • External Influences

29. What determines Cap Rates?

Reveal answer

The market and quality of the property; can be as low as 5% and as high as 12%.

Resident Rights

30. When entering an apartment unit, how can you limit liability?

Reveal answer

Strictly follow your right of entry policies

31. You may enter an apartment unit without notice in case of emergency. List some emergency examples.

Reveal answer
  • Smoke pouring out of windows
  • Water leaking out of unit
  • Gunshots
  • Screaming
  • Smell of gas

32. What are some reasons law enforcement or government officials may want entry to an apartment unit?

Reveal answer
  • Random building inspection
  • Suspected safety or health violation
  • Serving an arrest warrant
  • The pursuit of fleeing criminals

33. Regarding satellite dishes and TV antennas, what has the Federal Communications Commission (FCC) ruled?

Reveal answer

Apartment residents may not be unreasonably restricted from installing an individual satellite dish or antenna

Resident Safety

34. What is negligence?

Reveal answer

An unreasonable response to a foreseeable risk

35. When preventing danger, what should you encourage residents to do?

Reveal answer
  • Understand personal responsibility for safety
  • Inform management of dangerous situations

36. What are your disclosure responsibilities regarding a tenant who has a sex offense conviction?

Reveal answer

It depends on the specific state regulations; seek legal counsel

37. If a resident is injured through criminal activity, can they sue the apartment manager? Why or why not?

Reveal answer

Yes; you can be liable if you acted unreasonably in the face of foreseeable risk

38. What is Megan’s Law?

Reveal answer

A law requiring authorities to notify communities of the whereabouts of convicted sex offenders

39. What does that Virginia Graeme Baker Pool & Spa Safety Act require?

Reveal answer

All public pools and spas MUST use anti-entrapment devices

Contractor Agreements

40. When should you hire a contractor?

Reveal answer
  • Your normal staff cannot do the task
  • It is more cost effective
  • You need required documentation

41. Can your property be held liable for the actions of a contractor?

Reveal answer

Yes; legally, contractors may be viewed as extensions of the property management team

42. What are the four Bid Process Elements?

Reveal answer
  • Performance Security
  • Insurance Certificates
  • Awarding a Bid
  • Bidder Disqualification

43. In which section of a contract is the type of work that will be performed and the time frame for the work?

Reveal answer

Scope of Work

44. What is performance security?

Reveal answer

A form of security deposit that ensures the successful bidder will perform according to all contract requirements

45. What should be included in a bid invitation?

Reveal answer
  • The specifications for the procurement
  • Terms and conditions
  • Specifications defining goods or services
  • Formally numbered specifications

46. What is a lien waiver?

Reveal answer

A signed and notarized document that waives all claims against the property or the management company

47. What releases one party from liability for claims asserted by another party?

Reveal answer

General Waiver of Release

Explore Part 2 of this CAS Knowledge Check.