Enhancing Value through Ongoing Management

Study Questions

1. An investor purchased a property with an equity investment of $100,000 and an $800,000 mortgage. She has held the property for five years, and the mortgage now has a balance of $750,000. The market value of her property is estimated to be $950,000. What is her present equity investment?

2. What should be included as costs to be matched by value added after rehabilitation?

3. In what ways are the maintenance and repair decision and the rehabilitation decision similar? How do they differ?

4. What factors can change after rehabilitation of a property to produce a higher "after" value than "before" value?

5. What does the property management agreement accomplish?

6. How does routine maintenance and repair affect a property's performance?

7. Define deferred maintenance and list some examples.

8. How is the financial compensation for property managers usually determined? What "agency" problem does this seem to create?

9. Why is the tenant mix critically important to the performance of shopping center investments?

10. In the real estate asset management/investment advisory business, why has performance-based management replaced, or at least supplemented, the "traditional" scheme for compensating some asset managers?

11. In the context of asset management agreements in the private commercial real estate industry, what is a benchmark index? What is the most typical benchmark index?

12. With respect to complying with applicable landlord-tenant laws, would you rather be managing an apartment complex or an office building? Explain.