F M PRESENTED BY: SAMPLE SAMPLE LIMITS OF LIABILITY AND DISCLAIMER OF WARRANTY © 2014 by the National Apartment Association, 4300 Wilson Boulevard Suite 400 Arlington, VA 22203. All rights reserved. The course materials or any part thereof may not be reproduced, stored in a retrieval system, or transmitted, in any form or by any means—graphic, electronic, or mechanical, including photocopying, recording, or otherwise, without the prior written permission of the National Apartment Association Education Institute (NAAEI). NAA retains copyright to the original materials and to any translation to other languages and any audio or video reproduction, or other electronic means, including reproductions authorized to accommodate individual requests based on religious or medical deferments from classroom participation. DISCLAIMERS Although NAAEI programs provide general information on apartment management practices, NAAEI does not guarantee the information offered in its programs is applicable in all jurisdictions or that programs contain a complete statement of all information essential to proper apartment management in a given area. NAAEI, therefore, encourages attendees to seek competent professional advice with respect to specific problems that may arise. NAAEI, their instructors, agents, and employees assume no responsibility or liability for the consequences of an attendee’s reliance on and application of program contents or materials in specific situations. Though some of the information used in scenarios and examples may resemble true circumstances, the details are fictitious. Any similarity to real properties is purely coincidental. Forms, documents, and other exhibits in the course books are samples only; NAAEI does not necessarily endorse their use. Because of varying state and local laws and company policies, competent advice should be sought in the use of any form, document, or exhibit. POLICY STATEMENT REGARDING THE USE OF RECORDING DEVICES, AUDIO VISUAL EQUIPMENT, AND OTHER MEANS OF REPRODUCTION OR RECORDING OF THE “CERTIFIED APARTMENT MANAGER” MATERIALS All program contents and materials are the property of the National Apartment Association Education Institute, which strictly prohibits reproduction of program contents or materials in any form without the prior written consent. Except as expressly authorized in writing in advance, no video or audio recording of NAAEI programs or SAMPLEphotocopying of “Certified Apartment Manager” materials is permitted. Authorized recording of programs or duplication of materials may be done only by the instructor on site. © 2014 National Apartment Association ACKNOWLEDGMENTS SUBJECT MATTER EXPERTS The NAA Education Institute wishes to thank the following apartment industry professionals for contributing their time and expertise to the rewrite of the Certified Apartment Manager Research, Analysis and Evaluation program: Lead Subject Matter Expert Susan E. Weston, CAM CAPS, NAAEI Faculty Licensed Texas Broker Professor, University of North Texas School of Business The Susan Weston Company 2655 Mount View Drive Dallas, TX 75234-6239 972.308.6092 Office 972.415.6299 Cell [email protected] www.susanweston.com KEY CONTRIBUTORS • David Jolley, CAMT • Howard L. Campbell, Ph.D. • Fisher & Phillips, LLP • Kimball, Tirey,SAMPLE and St. John, LLP • Sue Weston, CAM, CAPS © 2014 National Apartment Association Certified Apartment ManagerSM Participant Guide Financial Management Financial Management Table of Contents Chapter 1: Investments 1-1 Chapter Overview ................................................................................................................... 1-1 Background ............................................................................................................................ 1-2 Factors in Investment ............................................................................................................. 1-3 Investment Performance Measurements ............................................................................... 1-5 Advantages and Disadvantages of Apartment Investments ................................................... 1-7 Apartment Ownership ............................................................................................................. 1-8 Mortgage Loans ................................................................................................................... 1-10 Chapter 2: Adding Value to the Investment 2-1 Chapter Overview ................................................................................................................... 2-1 Background ............................................................................................................................ 2-2 Rental Income ........................................................................................................................ 2-3 Factors that Affect Rental Rates ............................................................................................ 2-5 Rental Rate Adjustments ........................................................................................................ 2-8 Managing Occupancy ........................................................................................................... 2-15 Expenses .............................................................................................................................. 2-22 Chapter 3: Economic Analysis of a Property 3-1 Chapter Overview ................................................................................................................... 3-1 Background ............................................................................................................................ 3-2 Financial Statements .............................................................................................................. 3-3 Concepts ................................................................................................................................ 3-4 The General Ledger ............................................................................................................. 3-11 Chapter 4: Budgets 4-1 Chapter Overview ................................................................................................................... 4-1 Background ............................................................................................................................ 4-2 Types of Budgets ................................................................................................................... 4-3 Budget Development & Management..................................................................................... 4-5 Chapter 5: Property Valuation 5-1 Chapter Overview ................................................................................................................... 5-1 Background ............................................................................................................................ 5-2 Ways to Determine Property Value ........................................................................................ 5-3 Toolbox Toolbox-1 Overview ..................................................................................................................... Toolbox-1 Annual Turnover Percentage ...................................................................................... Toolbox-3 Annualizing a Number ................................................................................................. Toolbox-3 Average Effective Rent ................................................................................................ Toolbox-4 Average Renewal Increase ......................................................................................... Toolbox-4 Average Square Feet/Unit ........................................................................................... Toolbox-5 Capitalization/ValuationSAMPLE ............................................................................................... Toolbox-5 Closing Percentage/Ratio ............................................................................................ Toolbox-6 Continued on next page © 2014 National Apartment Association i Certified Apartment ManagerSM Participant Guide Financial Management Table of Contents, Continued Cost of Advertising Per Lease ..................................................................................... Toolbox-6 Cost of Advertising Per Traffic ..................................................................................... Toolbox-6 Effective Gross Income (Net Rental Income) .............................................................. Toolbox-7 Economic Occupancy Percentage .............................................................................. Toolbox-7 Effective Rent .............................................................................................................. Toolbox-8 Gross Potential Rent (GPR) ........................................................................................ Toolbox-8 Hourly Rate on Annual Basis ...................................................................................... Toolbox-9 Leasing Exposure ...................................................................................................... Toolbox-10 Month-to-Month Leased Percentage ......................................................................... Toolbox-10 Net Operating Income (NOI).....................................................................................