Chapter 16: Property Management
(Colibri Real Estate) Questions And
Answers With Verified Solutions 100%
Correct!!!
A buyer would like to start out with a significant amount of equity invested in his
house, so that he can reborrow against the equity if necessary. When structuring
a loan, what should the buyer's highest priority be?
Largest downpayment possible
Longest loan term possible
Lowest interest rate possible
Smallest downpayment possible - ANSWER✔✔Largest downpayment possible
Equity refers to the difference between the property's value and the loans against
the property. Therefore, the larger the downpayment the buyer makes, the more
equity in the property he will have initially.
Vandelay Industries sells its office building to Howard Holding Co. in order to raise
some cash, but leases it back from them, so they won't have to move. Once this
transaction closes, what kind of interest does Vandelay have in the property?
The selling party in a sale-leaseback transaction will have a leasehold interest (in
other words, a non-freehold interest) in the property once the transaction is
completed.
In a sale-leaseback:
the grantor becomes the grantee
the grantor becomes the lessee
the broker has purchased the property
,the property is sold at a loss - ANSWER✔✔the grantor becomes the lessee
The grantor (seller) sells the property, but remains in possession as a lessee
(tenant).
One tax advantage of investing in real estate is:
high liquidity
low risk
homestead protection
sheltering of income - ANSWER✔✔sheltering of income
Real estate investment is often thought of as a "tax shelter" because it serves to
partially shelter investors from income tax liability.
A property management agreement is amended to take into account some
changing circumstances. The amendment must be signed by the owner and:
the designated broker for the firm providing management services
anyone who works for the brokerage company
the tenant
the tenant and the real estate licensee - ANSWER✔✔the designated broker for
the firm providing management services
A property management agreement is a contract between a property owner and
the real estate firm that provides the management services. It is not a contract
between the property owner and an individual licensee, although in some cases a
licensee may sign on behalf of his brokerage.
A property management agreement must contain which of the following?
A salary for the property manager
,What percentage of the property's net income will be used as the manager's
commission
Marketing plans
The property manager's scope of authority - ANSWER✔✔The property manager's
scope of authority
Any property management agreement should include the scope of the manager's
authority, such as whether he can collect and disburse funds. It should also
discuss the manager's compensation, but the compensation need not take the
form of salary; it could be by commission, for example.
Which of the following is typically included in a management agreement?
Certificate of occupancy
Authorization for the property manager to pay expenses
Joint survivorship
Waiver of subrogation - ANSWER✔✔Authorization for the property manager to
pay expenses
Management agreements usually authorize the manager to pay expenses related
to the management of the property.
A property manager decides to offer some additional services beyond what is
specified in the property management agreement. She may do so after:
giving the tenants 30 days' notice
obtaining written authorization from the owner
providing notice to the Department of Licensing
, the management agreement is amended in a writing signed by the owner and
designated broker - ANSWER✔✔the management agreement is amended in a
writing signed by the owner and designated broker
Whenever the duties and powers of a property manager change, the property
management agreement (the document that describes the scope of a property
manager's authority) must be amended.
Property management agreements generally include provisions on all of the
following EXCEPT the:
amount of the security deposit that must be collected from each tenant
manager's authority to pay property expenses
starting and termination date of the agreement
manager's responsibility to provide the owner with management reports -
ANSWER✔✔amount of the security deposit that must be collected from each
tenant
Deposit amounts are found in the rental agreements, not the property
management agreement.
The annual cash flow divided by the equity invested is referred to as
_______________. - ANSWER✔✔cash on cash
The ease with which an asset may be converted into cash is referred to as its
_______________. - ANSWER✔✔liquidity
The use of borrowed capital to finance the purchase of real estate or other assets
is called _______________. - ANSWER✔✔leverage
The _______________ is that sum of money generated from income-producing
property after all operating expenses and mortgage payments, including principal
and interest, have been made. - ANSWER✔✔cash flow
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