CERTIFIED APARTMENT MANAGER (CAM) EXAM
QUESTIONS AND ANSWERS
/ Cash Flow - Answer-•The amount of money left after all sources of income are
collected and operating expenses, capital expenses and debt service have been paid.
•Often referred to as the operating statement.
/.Gross Potential Rent (GPR) - Answer-•Current rent charged at 100% occupancy-
combines the sum of occupied units at current lease rents plus vacant units at market
rents.
•100% of possible income.
•All other income and expenses measured and evaluated as % of GPR.
•Also referred to Total Possible Current Rent (TPCR).
/.Market Rent - Answer-•Total annual income received if 100% of all units were
occupied and paying market rents.
/.Loss to Lease (LOL) - Answer-•Variance between market rent and lease rent.
•Market rent that is "lost" due to lease rents at rates lower than the market rate.
•For many companies it is a separate line item on the operating statement.
•Also known as variance.
/.Loss to Lease Example - Answer-•Annual market rent of $1,375,025 with a loss to
lease of $125,700 has a loss to lease of 9.1%.
•125,700/1,375,025=.0914 or 9.1%.
•GPR of $1,249,325; market rent of $1,375,025 less loss of $125,700.
/.Vacancy, Concession and Collection Loss (VAC) - Answer-•Total value of rent loss
from vacant units, concessions given, collection losses from bad debt write-off, rent loss
from non-revenue units.
•Standard for uncollectible/bad debt-2% of GPR.
•VAC can be higher than 10% of GPR.
/.Effective Gross Income (EGI) - Answer-•GPR less vacancy, concessions and
collection loss. Also called net rental revenue or total rental income.
•Represents all rent and only the rent income at the property.
•GPR-VAC=EGI.
/.Other Income (OI) - Answer-•Income from items other than rent.
•Laundry, cable, parking, amenity charges, pet fees, application fees, administrative
fees, lease premium fees, late fees.
•Fee policies established by owner or manager.
•Up to 10% of GPR - NAA survey in 2010 7.2% of GPR or $753 per unit (annually).
, /.Gross Operating Income (GOI) - Answer-•EGI+OI=GOI.
•Property's total revenue.
•Available to pay property's operating expenses, capital improvements and debt service.
/.Operating Expense (OE) - Answer-•All expenses fixed and variable incurred in the
course of managing the property.
•Controllable and uncontrollable expenses.
•Capital expenses and reserve for replacement costs are not typically considered
operating expenses.
/.Net Operating Income (NOI) - Answer-•GOI-OE=NOI
•Applying cap rate to NOI allows you to determine property value using the income
approach.
/.Operating Expense Ratio - Answer-•Expense to income ratio.
•Evaluation tool to measure property performance and expense control.
•% of GPR used to pay operating expenses.
•Ratio depends on age, location, property type and expense classification.
•OE/GPR=Operating Expense Ratio.
•2010 NAA survey showed national OE ratio of 40%.
/.Capital Expenses (CE or CapEx) - Answer-•Also called capital improvements.
•Includes non-recurring expenditures like appliances, roofing, carpet replacement, etc.
intended to add to the life of the property and its fixtures.
•Offer ability to depreciate over time.
/.Debt Service - Answer-•Mortgage or loan payment-principal and interest payment.
•Fixed rate mortgages usually have level monthly payments that amortize the loan.
/.Break Even Occupancy Ratio - Answer-•(OE+DS) / GOI.
•Example: 1,803,800+1,278,000=3,081,800
3,081,800/4,359,000=71%
This means when the property is 71% occupied they break even.
/.Break Even Rent Per Sq Ft - Answer-•(OE+DS) / Total Square Feet.
•Example:
$1,803,800+$1,278,000=$3,081,800
$3,081,800/760,000=$4.05.
/.Cash Flow Calculation - Answer-GPR-VAC=EGI
EGI+OI=GOI
GOI-OE=NOI
NOI-CE-Debt Services-RRA=CF
/.Three Keys to Good Customer Service - Answer-•Communication
•Attitude
QUESTIONS AND ANSWERS
/ Cash Flow - Answer-•The amount of money left after all sources of income are
collected and operating expenses, capital expenses and debt service have been paid.
•Often referred to as the operating statement.
/.Gross Potential Rent (GPR) - Answer-•Current rent charged at 100% occupancy-
combines the sum of occupied units at current lease rents plus vacant units at market
rents.
•100% of possible income.
•All other income and expenses measured and evaluated as % of GPR.
•Also referred to Total Possible Current Rent (TPCR).
/.Market Rent - Answer-•Total annual income received if 100% of all units were
occupied and paying market rents.
/.Loss to Lease (LOL) - Answer-•Variance between market rent and lease rent.
•Market rent that is "lost" due to lease rents at rates lower than the market rate.
•For many companies it is a separate line item on the operating statement.
•Also known as variance.
/.Loss to Lease Example - Answer-•Annual market rent of $1,375,025 with a loss to
lease of $125,700 has a loss to lease of 9.1%.
•125,700/1,375,025=.0914 or 9.1%.
•GPR of $1,249,325; market rent of $1,375,025 less loss of $125,700.
/.Vacancy, Concession and Collection Loss (VAC) - Answer-•Total value of rent loss
from vacant units, concessions given, collection losses from bad debt write-off, rent loss
from non-revenue units.
•Standard for uncollectible/bad debt-2% of GPR.
•VAC can be higher than 10% of GPR.
/.Effective Gross Income (EGI) - Answer-•GPR less vacancy, concessions and
collection loss. Also called net rental revenue or total rental income.
•Represents all rent and only the rent income at the property.
•GPR-VAC=EGI.
/.Other Income (OI) - Answer-•Income from items other than rent.
•Laundry, cable, parking, amenity charges, pet fees, application fees, administrative
fees, lease premium fees, late fees.
•Fee policies established by owner or manager.
•Up to 10% of GPR - NAA survey in 2010 7.2% of GPR or $753 per unit (annually).
, /.Gross Operating Income (GOI) - Answer-•EGI+OI=GOI.
•Property's total revenue.
•Available to pay property's operating expenses, capital improvements and debt service.
/.Operating Expense (OE) - Answer-•All expenses fixed and variable incurred in the
course of managing the property.
•Controllable and uncontrollable expenses.
•Capital expenses and reserve for replacement costs are not typically considered
operating expenses.
/.Net Operating Income (NOI) - Answer-•GOI-OE=NOI
•Applying cap rate to NOI allows you to determine property value using the income
approach.
/.Operating Expense Ratio - Answer-•Expense to income ratio.
•Evaluation tool to measure property performance and expense control.
•% of GPR used to pay operating expenses.
•Ratio depends on age, location, property type and expense classification.
•OE/GPR=Operating Expense Ratio.
•2010 NAA survey showed national OE ratio of 40%.
/.Capital Expenses (CE or CapEx) - Answer-•Also called capital improvements.
•Includes non-recurring expenditures like appliances, roofing, carpet replacement, etc.
intended to add to the life of the property and its fixtures.
•Offer ability to depreciate over time.
/.Debt Service - Answer-•Mortgage or loan payment-principal and interest payment.
•Fixed rate mortgages usually have level monthly payments that amortize the loan.
/.Break Even Occupancy Ratio - Answer-•(OE+DS) / GOI.
•Example: 1,803,800+1,278,000=3,081,800
3,081,800/4,359,000=71%
This means when the property is 71% occupied they break even.
/.Break Even Rent Per Sq Ft - Answer-•(OE+DS) / Total Square Feet.
•Example:
$1,803,800+$1,278,000=$3,081,800
$3,081,800/760,000=$4.05.
/.Cash Flow Calculation - Answer-GPR-VAC=EGI
EGI+OI=GOI
GOI-OE=NOI
NOI-CE-Debt Services-RRA=CF
/.Three Keys to Good Customer Service - Answer-•Communication
•Attitude
