capital expenditures.An example of corrective maintenance

Chapter 19: Property Management Flashcards

Capital Reserve BudgetMoney set aside by a property owner for long-term capital expenditures to a property.Also known as a replacement reserve.Corrective MaintenanceA maintenance task performed to identify, isolate, and rectify a problem with a property so that the property can be restored to an acceptable condition.In other words, corrective maintenance does NOT involve major repairs or capital expenditures.An example of corrective maintenance would include fixing a leaky faucet.Management AgreementA management agreement is signed between the property owner and the property manager.This contract creates an agency relationship in which the owner is the principal and the property manager is the agent for the purposes specified in the agreement.The management agreement creates a general agency relationship between the owner and property manager.Real Estate License RequirementsWhen a property manager works for only one owner, a real estate license is not required.However, when an individual (or company) serves as a property manager for more than one owner, at least a real estate salesperson license is required.- you do not need a real estate license to negotiate a mortgage.

Preventative Maintenance:Preventative maintenance involves keeping property and

equipment in a good state of repair so as to minimize the need for more costly repair work or replacement.An example of preventative maintenance would include changing air filters in air conditioners and furnaces.Operating StatementThe operating statement is used by property managers to project the net operating income for the property.The operating statement defines all of the income and expenses for the property.Stabilized BudgetA stabilized budget is a forecast of income and expenses as may be reasonably projected over a short term, typically five years.