Mixed Deck — All CPM Topics Flashcards

Which system in a commercial building is responsible for heating, cooling, and ventilation?

Answer: HVAC (Heating, Ventilation, and Air Conditioning)

The HVAC system controls indoor climate by providing heating, cooling, and fresh air circulation throughout the building.

Which approach to real estate valuation estimates value based on the income a property is expected to produce?

Answer: Income capitalization approach

The income capitalization approach values a property based on its expected income stream, making it the primary method used for income-producing properties.

What is the purpose of conducting a 'due diligence' property inspection before acquisition?

Answer: To identify physical deficiencies, deferred maintenance, and capital needs before purchase

Due diligence inspections uncover existing deficiencies and estimate future capital requirements, informing the purchase price and post-acquisition budget.

What is 'subrogation' in insurance?

Answer: The insurer's right to recover from a negligent third party after paying a claim

Subrogation allows an insurer who has paid a claim to step into the insured's shoes and pursue recovery from the responsible third party.

Which act requires employers with 50+ employees to provide up to 12 weeks of unpaid, job-protected leave for qualifying family and medical reasons?

Answer: The Family and Medical Leave Act (FMLA)

The FMLA entitles eligible employees of covered employers to up to 12 weeks of unpaid, job-protected leave per year for qualifying family and medical situations.

What is the significance of the 'lease expiration schedule' for a commercial property manager?

Answer: It identifies when leases expire to plan renewal campaigns and avoid simultaneous mass expirations

Monitoring lease expirations helps managers stagger renewals, avoid cliff-edge vacancy risks, and start retention conversations with tenants well in advance.

In property asset management, what is the primary purpose of a capital reserve study?

Answer: To project future major repair and replacement costs

A capital reserve study projects the timing and cost of future major repairs and replacements, enabling property owners to fund reserves adequately over time.

What is the primary purpose of a market analysis in property management?

Answer: To identify competitive properties and set appropriate rental rates

A market analysis identifies comparable properties, current rental rates, vacancy trends, and demand drivers to set competitive rents.

What is a 'right of first refusal' (ROFR) clause in a lease?

Answer: The tenant's right to match any offer the landlord receives before space is leased to another party

A ROFR gives a tenant the right to lease adjacent space or purchase the property by matching any third-party offer the landlord receives.

Which document transfers possessory rights of a property to a tenant for a specified period in exchange for rent?

Answer: Lease

A lease is the legal contract that grants a tenant the right to occupy and use property in exchange for rent payments over a defined term.

In a management agreement, the asset management fee is typically structured as a percentage of which financial measure?

Answer: Gross collected rents

Property management fees are most commonly calculated as a percentage of gross collected (effective) rents, aligning the manager's compensation with rent collection performance.

What is 'risk transfer' in property risk management?

Answer: Shifting financial responsibility for a risk to another party, typically through insurance or contract

Risk transfer shifts the financial consequences of a risk to another party, most commonly through purchasing insurance or including indemnification clauses in contracts.

What is the Gross Rent Multiplier (GRM) of a property with a market value of $1,200,000 and annual gross rents of $150,000?

Answer: 8

GRM = Market Value ÷ Annual Gross Rents = $1,200,000 ÷ $150,000 = 8.

What is 'steering' under Fair Housing law?

Answer: Directing tenants toward or away from neighborhoods based on protected characteristics

Steering is the illegal practice of guiding prospective tenants toward or away from certain neighborhoods based on their protected class membership.

What is a 'reserve fund' in property management?

Answer: Money set aside from operations for future major repairs or replacements

A reserve fund accumulates money over time to cover anticipated major capital expenditures such as roof replacement or parking lot resurfacing.

In real estate investment, 'leverage' refers to:

Answer: Using borrowed capital (debt) to increase the potential return on equity

Leverage in real estate means using borrowed money (a mortgage) to finance a property purchase, which can amplify returns on the equity invested but also increases risk.

What is the purpose of a property inspection during a tenant move-out?

Answer: To document the property's condition and determine security deposit deductions

A move-out inspection documents the property's condition compared to move-in, forming the basis for any legitimate security deposit deductions.

Which energy efficiency measure involves adjusting building systems to operate only when and where needed?

Answer: Building automation / smart controls

Building automation systems (BAS) and smart controls optimize HVAC, lighting, and other systems by adjusting operation based on occupancy and need.

A property manager who commingles client funds with personal funds is violating which duty?

Answer: Duty of accounting

Commingling client funds violates the fiduciary duty of accounting, which requires keeping client money separate from personal or company funds.

What does a 'proforma' financial statement represent in real estate?

Answer: Projected future income and expenses used to evaluate investment potential

A proforma is a forward-looking financial projection that estimates expected income, expenses, and returns for a real estate investment.