Chapter 9 The Management

Office & Reports

Management Office

Staffing

Expenses

Management Fees

Financial Reports
 Management Office

Reflects the scope and nature of

management operations

Staffed by individuals who see that the

company meets its commitments to the
owners and tenants
 Management Office
Things to consider when establishing the
Management Office

On-Site versus Off-Site

Location in the building

Office design

Conference rooms

Administrative space

Storage

Office tools
 Management Office
Files
Lease
Copies of lease
Lease Abstract
Credit information
References
Tenant documents

General Correspondence
Communication with tenants

Work Order
Bids
 Management Office
Files
Financial documents
Check register
Receipts
Disbursements
Budgets
Monthly reports

Permanent
Management contract
Mortgage documents
Title information
Insurance policy
Tax information
 Staffing
Head of Property Management

Property Manager Supervisor

On-Site Property Manager (s)

 Staffing
Office Manager

Bookkeeper / Cashier

Administrative Support

Technical Support
 Expenses
Direct Costs

All cost incurred by the management

company
 Expenses
Direct Costs
Payroll

Office Furniture and equipment

Insurance

Supplies
 Expenses
Direct Costs
Utilities

Legal

Stationary and postage

Auditing
 Expenses
Indirect Costs

When a management company share

facilities and expenses with other
division of the parent company
 Expenses
Indirect Costs

Office overhead

Accounting
 Management Fee

The fee charged by the property

management company to
manage the property
 Management Fee
Calculated as a percentage of effective
rental income:
Range is from 2% - 6%
Things to consider when calculating
the Management Fee:
Management Risk
Size of the building and / or # of units
# of Properties
 Operating Reports
Profit and Loss Statement (P&L) - A
financial statement showing the actual revenues,
expenses and net operating income or loss

Also called

Operating Statement

Income Statement

Statement of Income and Expenses

 Operating Reports
Reporting Package

Comparison of the actual vs budget

Income and Expenses

Month-To-Date

Year-To-Date
 Operating Reports
Reporting Package

Variance Analysis
Executive Summary
Cash Flow Statement
Accounts Receivables
Accounts Payables
Rent Roll
 Operating Reports
Break-even analysis

The occupancy level at which effective

rental income is sufficient to pay
operating expenses and debt service.
 Operating Reports

Return on Investment (ROI)

The percentage owed to the owner in

addition to the initial investment
 Operating Reports
Capitalization Rate (Cap Rate)

The rate at which cash flow is

discounted in determining the market
value of the property

What you want to earn on your

investment
 Homework

Case Study: XYZ Apartment Building