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DC Property Management License Exam Questions and Answers
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DC Property Management License Exam Questions and Answers
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DC Property Management License ExamQuestions and Answers
The primary responsibility of a real estate property manager is to
understand and implement the owner's goals and objectives
If an apartment building has 20 one bedroom units which rent for $800 per
month and 30 two bedroom apartments which rent for $1500 per month, what is
the Gross Potential Rental Income per month?
Gross Potential Rental Income per month calculation ($800 x 20) + ($1500 x 30)
=$61,000 per month
Management Plan
The plan describes in detail the subject property's intended use along with its
physical condition, fiscal projections, and any operational issues. It also includes
an analysis of the market (both regional and neighborhood), the competing
properties, as well as potential improvements or alternative uses for the subject
property.
Market Analysis
focuses on both a regional and neighborhood evaluation, which includes the
demographic conditions, geographic features, governmental prospective, existing
real estate supply, potential future developments, and tenant/ resident demand
Competitive Property Analysis
identifes the subject property's strengths and weaknesses
,Analysis of Alternatives
theoretical costs and coresponding increase in rents by making different
improvements, even the subject property's redevelopment.
Type of building alternatives
• Rehabilitate the property without altering its existing use
• Modernize the property by updating finishes, purchasing new or more efficient
equipment or enhancing existing features or amenities.
• Change the use of the building, including the conversion from one property type
to another (i.e. from industrial to single story office), or by demolishing it for a
completely new development.
• Conversion to a condominium ownership structure
Three types of obsolescence
Physical Obsolescence, Functional Obsolescence, and Economic Obsolescence
Physical Obsolescence
is characterized as a condition of aging (i.e. wear and tear) or deferred
maintenance. Examples are worn carpets, peeling paint, a leaking roof, or dead
landscaping.
Functional Obsolescence
is characterized by old or outdated designs or building systems. Examples include
equipment that is not repairable because parts or no longer manufactured;
single pane window systems because they waste a large amount of energy;
outdated bathroom fixtures because of changing designs and tastes.
Economic Obsolescence
represents a loss in value due to outside forces (i.e. location, market conditions).
An example would be an office building, located in a small town, where the major
employer closes. This may result in both lower demand and rental rates.
,Depreciation
loss in value from the various forms of obsolescence. Depreciation can be
economically estimated on a broad level.
If a new 400 unit apa1tment building is worth $12,000,000 and depreciates in
value at 2.5% per year, what is its
Depreciated Value after five years?
$12,000,000 - $1,500,000 = $10,500,000 Depreciated Value after 5 years
If a new 400 unit apa1tment building is worth $12,000,000 and depreciates in
value at 2.5% per year, what is its
Depreciated Value after 1 year?
$12,000,000 x 0.025 = $300,000 per year of Depreciated Value
If a new 400 unit apartment building is worth $12,000,000 and depreciates in
value at 2.5% per year, what is its
Accumulated Depreciated Value after 1 year?
$300,000 x 5 years= $1,500,000 accumulated Depreciation
What are the different types of property values?
Investment Value, Assessed Value, Market Value, Depreciated Value
Investment Value
This is the value that is generally used by investors. It is frequently determined
either by calculating the Net Operating Income and applying a Capitalization
Rate to it or from Cash Flow by determining the Return on Investment.
Assessed Value
This is the value used by government tax assessment offices. Since it is frequently
determined using sophisticated mathematical models that are applied to many
, similar types of properties over a geographic area, it can be less accurate and
produce results that are higher or lower than other types of "values".
Market Value
This is the value that is agreed to between a buyer and seller. It represents the
"meeting of the minds".
Depreciated Value
This is used for income tax purposes and affects a property's tax basis. In the past,
the Federal Government has implemented accelerated depreciation programs to
help promote economic growth.
List Price
This is only the price that the owner has offered to sell a property for.
Management Agreement
formal and binding contract that establishes the authority and responsibilities
that the manager has on behalf of the owner and in operating the property
A management agreement has the following sections
•Provides the name of the owner and manager
•Specifies the term of the agreement
•Describes the property
•Describes the services provided by the manager
•Identifies who collects the rent payments
•Identifies in whose name all service contracts are to be made
•Describes when funds are to be disbursed
•Identifies whose employees work at the property
•Determines if fidelity bonds necessary
•Indicates how many bank accounts are needed and their purpose
•Identifies who maintains various building licenses (elevator, boiler, etc.)
•Provides insurance requirements and who secures the policies
•Specifies the management fee compensation
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