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CAPS Study Guide

Ethics Your moral compass
Keys to Ethical Excellence Obey the rules
Keys to Ethical Excellence Do the right thing
Keys to Ethical Excellence Listen to your conscience
Keys to Ethical Excellence Talk with ethical mentors
Keys to Ethical Excellence Be prepared for pushback
Keys to Ethical Excellence Easier to do the right thing now than to undo a wrong thing later
Keys to Ethical Excellence Dont' just talk about ethics, live it
Keys to Ethical Excellence Recognize if something "Smells"
Keys to Ethical Excellence Champion others who act with integrity
Keys to Ethical Excellence Expect High Standards from others
CAPS Role Manage the relationship between property owner and the management staff.
CAPS Role Make sure portfolio performs to expections
CAPS Role Increase performance of underperforming properties.
CAPS Role **All based on solid knowledge of the property owners goals.
CAPS Role Property Owner's Goals - Different goals for different properties.
CAPS Role Property Owner's Goals - short term goals differ from long term goals
CAPS Role Determine Owner's goals by talking directly to the owner so the message is not diluted.
CAPS Role Don't forget portfolio goals. Stronger properties can carry weaker ones (and vise versa)
CAPS Role Ability to meet owner's goal only as good as your onsite team.
Most Common Owner Goals Specific Rate of Return
Most Common Owner Goals Regular Cash flow
Most Common Owner Goals Refinancing
Most Common Owner Goals Renovating or retrofitting
Most Common Owner Goals Repositioning the property
Most Common Owner Goals Income to acquire more properties.
Financial Strategy Keep owner well informed of details
Financial Strategy Factor owner goals into all key financial activities
Financial Strategy Provide incisive and timely analysis
Financial Strategy Take decisive and effective steps to correct shortfalls
Financial Strategy Recommend strategies and tactics
Financial Strategy Assess property or portfolio growth regularly
Communication Tips Different owners have different communication preferences - email, phone, etc...)
Communication Tips Be proactive
Communication Tips Amount of communication will vary based on size and condition of property / portfolio and preference of owner
Communication Tips Document all interactions (issues discussed and decisions made)
Working with Multiple Owners Manage time and resources to avoid conflict
Working with Multiple Owners You can't always ration time and attention solely based on size of property.
Working with Multiple Owners Make sure particular properties don't become chronic abusers of your time.
Management Agreement Contract between owner and managing agent
Management Agreement They protect both the owner and the managing agent
Management Agreement Establish the rights, responsibilities and limitations for the management agent.
Management Agreement Establishes an agency relationship so that the management agent has the authority to act on behalf of the owner.
Management Agreement Will be different between: -Related ownership and management agencies -Third-party fee non-related management entity and owner
Key Parts of a Management Agreement Budget and Business Plan - Established jointly by owner and management company - Gives the management company financial guidelines
Key Parts of a Management Agreement Minimum Leasing Guidelines - Establishes management company accountability for property performance
Key Parts of a Management Agreement Obligation to Advance Payments - Owner obligated to cover costs - Management company not obligated to use it's own money - Reasonable interest rate if management company does advance it's own funds.
Key Parts of a Management Agreement Operating Expenses - Let's management company reimburse itself and collect interest
Key Parts of a Management Agreement Extraordinary Expenses - Defines spending limits and the process for exceeding those limits (with latitude for emergencies)
Key Parts of a Management Agreement Legal Fees - Owner responsible for legal fees for property - Owner not responsible for legal fees if management company guilty of fraud or misconduct. - Sets limits on legal fees and guidelines for notifying owner if limits will be exceeded. - Limits
Key Parts of a Management Agreement Money at the end of the month - is transmitted to the owner after all expenses are paid Specifies bank information and frequency of fund transfer.
Key Parts of a Management Agreement Who gets paid first - order of debt priority if income will not cover it. Typically - Mortgage, Utilities, Payroll, Management Fees, etc..
Key Parts of a Management Agreement Reports - establishes required reports and schedule.
Key Parts of a Management Agreement Financial Audits - owners right to request periodic audits (with notice) Owner pays for audit
Key Parts of a Management Agreement Leasing and Rental Practices - management company to attempt to keep units rented, handle rental agreements, owner responsible for leasing costs, sets maximum lease term, shares approval of rental agreement form.
Key Parts of a Management Agreement Performance and Repairs
Key Parts of a Management Agreement Contracts, Utilities, and Services - Management company negotiates contracts for non-recurring item, contract utilities companies on owner's behalf, owner responsible for deposits.
**Key Parts of a Management Agreement **Contract Limitations - be in legal name of the property, be assignable to owner or another designated party, be one year in length w/ 30 day notice and require all contractors to have insurance.
Key Parts of a Management Agreement Management Company Compensation and Expenses - Establishes management company payment services - Specifies any incentive bonuses and any additional fees for special task.
Key Parts of a Management Agreement Termination - Right to terminate with 30 day notice for cause - Owner pays amount owned at time of termination - Management company indemnifies from liability - Management company delivers all monies due to owner - Prohibits owner from hiring managme
Key Parts of a Management Agreement Complete Agreement - Establishes agreement and all attachments replace all previous agreements - Prevents change to agreement without written approval from both owner and management company.
Property Information Sheet Documents static information about the property: - Location, size, name, age - Relevant building codes - Mix of units - Amenities - Mortgage information - Tax parcel ID number
Owners Report Gives clear picture of how property has performed - for the previous month, quarter and year.
Owners Report Links property performance to owner's objectives
Owners Report Created according to schedule dictated by Management agreement
Owners Report Includes key financial and operational reports
Owners Report Includes Key narratives (i.e., analysis of variances, impact of current market conditions, responses)
Owners Report Not a substitute for regular communication
CAPS Role - Owner Report Reviews the owner report created by CM and add's executive summary.
CAPS Role - Owner Report Ensure owner report is: - Clear and detailed - Thoroughly explains property performance - Thoroughly explains actions plans - Explains budget variances - Is supported with date and other reports.
**Part of the Owner Report **Executive Summary
**Part of the Owner Report **Overview of Market/Economic Conditions
**Part of the Owner Report **Capital Expenses / Physical Plant
**Part of the Owner Report **Financial Operations
**Part of the Owner Report **Property Operations Activity
**Part of the Owner Report **Reports
Management Company Stakeholder in the property
Management Company - CAPS Role It is your job to ensure that your properties are generating high occupancy rates (both physical and economical) at maximum rents.
Management Company - CAPS Role Referral and Repeat Business
Management Company - CAPS Role Manage Company Employees
Third-Party Vendors and Contractors Operate as an extension of the management company while on property. - Their actions reflect on property management and the reputation of the property. - They rely on your ability to pay for their work.
Lenders (Mortgage Company) One of the stakeholders most invested in the financial health of the property
Lender Requirements Property Maintenance
Lender Requirements Insurance Coverage
Lender Requirements Lender Inspections
Lender Requirements Replacement reserve funding
Lender Requirements Reporting
Lender Requirements Occupancy (Physical and economical)
Lender Requirements Collections
Lender Requirements Debt Coverage Ratio
Lender Requirements Maximum number of corporate and month to month leases
Lender Requirements Regulatory Compliance
Lender Requirements Length of terms.
Debt Coverage Ratio Compares property's expected net operating income (NOI) with annual cost for debt servicing.
CAPS Role - Debt Coverage Ratio Needs to ensure sufficient cash flow to meet Lender's desired Debt Coverage Ratio (DCR)
Created by: bgrasha
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