Certified Apartment Manager (CAM) 383
Q&A/ A+ Score Solution.
Describe cost-benefit analysis. - Answer: Process of weighing a potential expense
against a potential benefit.
What is the most important thing to keep in mind when developing a budget? -
Answer: The owners property objectives and investment goals.
What are the steps to the budget development process? - Answer: Identify goals
gather information
assign numerical values
When would you develop Rehap or Renovation budget? - Answer: When a
property is being rehabbed or undergoing retrofitting/modification.
Page 1 of 58
,What are the 3 tips to developing budgets covered today? - Answer: Be prepared
Use historical numbers
Seek input
What is extrapolation/annualization? - Answer: Estimating future information by
extending known information.
How do you analyze variances? - Answer: Compare budget to actual numbers.
Look at events on the property or in your submarket or region.
Are increased expenses favorable or unfavorable? - Answer: Unfavorable
Once you've analyzed and can explain variances, what should you do next? -
Answer: Determine what, if any, action to take.
What is the benefit to the investor resulting from an investment? - Answer:
Return; the financial benefit
What is the purpose of measuring performance? - Answer: Shows if goals are met
and drives investment decisions.
If a down payment is $200,000 and the cash flow generated is $20,000, what is
the Cash-on-Cash Return? - Answer: 10%
Page 2 of 58
,Does a lower cap rate indicate lower or higher value? - Answer: higher value
What type of property valuation approach would you use if there are several
similar properties in the area that have recently sold? - Answer: Sales comparison
approach
If you increase NOI by $24,000 and the cap rate is 6%, how much value are you
adding to the property? - Answer: $400,000
What attributes can affect the value of a property? - Answer: Supply and Demand
Highest and Best Use
External Influences
What determines the cap rates? - Answer: The market and quality of the
property; can be as low as 5% and as high as 12%.
The amount of rent that would be collected if a property was 100% occupied & all
residents were paying market rent. - Answer: Gross Potential Rent (GPR)
# of occupied units x average market rent - Answer: Gross Potential Rent (GPR)
The income of occupied units at existing lease rates and vacant units at current
market rates. - Answer: Gross Potential Income (GPI)
Page 3 of 58
, # of occupied units x average monthly rent + # of vacant units x average market
rent - Answer: Gross Potential Income (GPI)
Total value of rent loss from vacant units, concessions, collection losses, and non-
revenue units. - Answer: Vacancy, Concessions, and Collection loss. (VAC)
The amount of GPR less vacancy, concessions, collections loss and nonrevenue
units. Also called Net Rental Income (NRI) - Answer: Total Rent Revenue
GPR - VAC = - Answer: Total Rent Revenue
Income from items other than rent e.g. laundry, vending, parking, late fees, pet
fees, etc; can be up to 10% of total property income. - Answer: Other Income (OI)
The amount of GPR less vacancy, concession, collection loss and nonrevenue units
plus Other Income. Total property revenue from all sources. - Answer: Effective
Gross Income (EGI)
GPR - VAC + OI = - Answer: Effective Gross Income (EGI)
Includes all expenses, fixed and variable, incurred in the course of managing the
property. Capital Expenses are not typically included. - Answer: Operating
Expenses (OE)
Page 4 of 58
Q&A/ A+ Score Solution.
Describe cost-benefit analysis. - Answer: Process of weighing a potential expense
against a potential benefit.
What is the most important thing to keep in mind when developing a budget? -
Answer: The owners property objectives and investment goals.
What are the steps to the budget development process? - Answer: Identify goals
gather information
assign numerical values
When would you develop Rehap or Renovation budget? - Answer: When a
property is being rehabbed or undergoing retrofitting/modification.
Page 1 of 58
,What are the 3 tips to developing budgets covered today? - Answer: Be prepared
Use historical numbers
Seek input
What is extrapolation/annualization? - Answer: Estimating future information by
extending known information.
How do you analyze variances? - Answer: Compare budget to actual numbers.
Look at events on the property or in your submarket or region.
Are increased expenses favorable or unfavorable? - Answer: Unfavorable
Once you've analyzed and can explain variances, what should you do next? -
Answer: Determine what, if any, action to take.
What is the benefit to the investor resulting from an investment? - Answer:
Return; the financial benefit
What is the purpose of measuring performance? - Answer: Shows if goals are met
and drives investment decisions.
If a down payment is $200,000 and the cash flow generated is $20,000, what is
the Cash-on-Cash Return? - Answer: 10%
Page 2 of 58
,Does a lower cap rate indicate lower or higher value? - Answer: higher value
What type of property valuation approach would you use if there are several
similar properties in the area that have recently sold? - Answer: Sales comparison
approach
If you increase NOI by $24,000 and the cap rate is 6%, how much value are you
adding to the property? - Answer: $400,000
What attributes can affect the value of a property? - Answer: Supply and Demand
Highest and Best Use
External Influences
What determines the cap rates? - Answer: The market and quality of the
property; can be as low as 5% and as high as 12%.
The amount of rent that would be collected if a property was 100% occupied & all
residents were paying market rent. - Answer: Gross Potential Rent (GPR)
# of occupied units x average market rent - Answer: Gross Potential Rent (GPR)
The income of occupied units at existing lease rates and vacant units at current
market rates. - Answer: Gross Potential Income (GPI)
Page 3 of 58
, # of occupied units x average monthly rent + # of vacant units x average market
rent - Answer: Gross Potential Income (GPI)
Total value of rent loss from vacant units, concessions, collection losses, and non-
revenue units. - Answer: Vacancy, Concessions, and Collection loss. (VAC)
The amount of GPR less vacancy, concessions, collections loss and nonrevenue
units. Also called Net Rental Income (NRI) - Answer: Total Rent Revenue
GPR - VAC = - Answer: Total Rent Revenue
Income from items other than rent e.g. laundry, vending, parking, late fees, pet
fees, etc; can be up to 10% of total property income. - Answer: Other Income (OI)
The amount of GPR less vacancy, concession, collection loss and nonrevenue units
plus Other Income. Total property revenue from all sources. - Answer: Effective
Gross Income (EGI)
GPR - VAC + OI = - Answer: Effective Gross Income (EGI)
Includes all expenses, fixed and variable, incurred in the course of managing the
property. Capital Expenses are not typically included. - Answer: Operating
Expenses (OE)
Page 4 of 58
