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CAM Financial Managment Power Point Slides Terms Only
Power point slides and Math formulas from Financial Management section of NAA CAM course
Terms in this set (51)
Return on Investment = Percentage of return on each dollar invested
Cash Flow/ Investment = ROI
Net Operating Income
Low Cap Rate =
High Cap Rate =
Advantages of Investments
Periodic Cash Payments
Potential Increase in value
Reduction of income taxes due to depreciation
Ability to invest using borrowed funds
Disadvantages of investments
Real estate is not a liquid asset
Active participation is required
Potential of risk / natural disasters, changes in market conditions
Types of mortgages
Balloon and Bullet loans (paid in 1 lump sum)
What are CAM financial responsibilities
Generate and collect as much income as possible
Meet financial goals
Examples of economic conditions
What are the 6 p's
When determining Pricing
When to consider a rent INCREASE
When any floor plan remains 95% + occupied when turn over ratio is below 55%
When rates fall below levels in comparative market survey
Anytime community is full
Upon owner request
Types of community expenses
Variable- Utilities, turn over, payroll ect
Replacement reserve account
Debt Service - Mortgage ect
What is a Cost Benefit Analysis
A way of comparing the costs of an action to the benefits received.
questions to ask during an economic analysis
How well has the property performed over a specific period?
Where does the property stand at a specific date and time?
Cash Flow is often referred to as an
What is GPR / Gross Potential Rent
Current rent charged at 100% occupancy vacant units charged a market rent.
100% of possible income
All other income and expenses are measured and evaluated by % of the GPR
Accrual Accounting Method
Records all income and expenses when they were earned or incurred regardless of weather received or paid
Cash accounting Method
records income and expenses when paid or recieved
Loss to lease percentage
Loss to lease / Market Rent = Loss to lease percentage
Calculate Loss to lease
Market Rent -GPR = Loss to lease
What is VAC
Vacancy Concession and collection loss
Total Value of rent loss from vacant units, concessions collections, bad debt ect.
Can possibly be higher than 10% of GPR
What is the standard % for bad debt
Whit is OI
Income other than rent
apps, laundry, late fees ect.
Up to 10% of GPR
NAA says 7.2% of GPR or $753 per unit
Gross operating Income
Property's total revenue
What is a general ledger
Provides more detail of major financial statements
Chart of accounts
Cut off date for invoices to be submitted
What is a stabilized operating Budget
Reflects varying expenses from month to month
ex: Seasonal heating and cooling, snow removal ext
Reflects larger allocations for capital expenses and labor / renovations
Must be flexible because it most likely dependent on contractors
May include periods of no rental income due to renovations ect.
May be prepared separately from operating budgets and be for a short period of time
Tips for developing budgets
Use round #'s
Use current figures
Define the cost approach
Estimates the current cost of reproducing or replacing improvements, minus the loss of value due to depreciation + land value
Important when there is no market activity and a sales approach cant be used to value a property
Sales Comparison Approach
When the market value of a property is directly related to of comparable and competitive properties
Useful when there are similar properties in the area that have been sold or for sale
Income Capitalization Approach
Uses methods techniques and math procedures to
-analyze a property's ability to generate income and convert future earnings to present day dollars.
What is Debt service
Loan or mortgage payment
What effects Rental Rates?
supply and demand
Explain the purpose of a budget
Estimates of expected income and expenses are made to determine what occupancy levels and other sources of income will be needed to cover expenses and provide a return on investment.
monitor a property's performance
evaluate the performance of personnel
What is an asset?
economic resources that benefit an investment.
ex. real and personal property, and cash or bonds
List 5 of the sources that you can use to get information for your budget.
the previous budget including notes
• other properties (in the portfolio) of like size, age, condition, and
• other owners or supervisors
• current service contracts
• National Apartment Association historical data
• Institute of Real Estate Management historical data
• vendors and contractors for expected labor and material costs
• insurance agents
• utility companies
• taxing authority office, and
• industry income and expense surveys.
List the three (3) factors that affect rental income
Rate (or Competitive market rents)
Percent occupancy (or physical occupancy)
What does a balance sheet represent?
The balance sheet is a representation of the financial status of a property at an INSTANT of time
List the questions you need to ask yourself when analyzing budget
Have there been job layoffs?
• Is a new or established competitor attracting people? If so, why?
• Do they have lower rental rates or offer more amenities?
• Did they run a successful advertising campaign?
• Have you been able to raise rents compared to budget? If so, why?
• Are your budget variances a timing issue or likely to be permanent;
for example, are your utility bills late in being received, was the cable revenue payment not received in the month budgeted,
What are Fixed expenses
to estimate a number by extending known
Explain the impact of concessions on rent
Anytime concessions are provided the property will collect less rent than if the resident were paying scheduled market rent.
This is called effective rent or net rent.
Name 2 features of a lease-up budget.
Special attention will be paid to those activities and costs required to attract residents, get leases signed and generate income.
• Projecting expenses will be less precise than those for a stabilized property because there is no property history to which you can refer.
What does an income statement measure?
The income statement measures performance for a SPAN of time - a month, quarter or longer
State the purpose of a replacement reserve account.
a special savings account into which money is deposited on a monthly, quarterly or annual basis so that future funds
are available for large capital projects.
What factors affect rental rates?
supply and demand
What is the first thing you need to do when developing a budget?
Make sure that you understand the owner's investment goals for the property, and determine the long and short-term actions necessary for the result
What is a liability?
Liabilities are the economic obligations to non-owners
Examples of Variable expenses:
• turnover costs
• marketing (advertising and promotion)
• management fees
• recurring repairs and maintenance
• administrative costs, and
• payroll and benefits.
THIS SET IS OFTEN IN FOLDERS WITH...
Fair Housing (Certified Apartment Manager)
CAM - NAAHQ - Management of Residential Issues
CAM Risk Management 2014
Human Resources (Certified Apartment Manager)
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