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? 2014 by the National Apartment Association, 4300 Wilson Boulevard Suite 400 Arlington, VA 22203. All rights reserved. The course materials or any part thereof may not be reproduced, stored in a retrieval system, or transmitted, in any form or by any means--graphic, electronic, or mechanical, including photocopying, recording, or otherwise, without the prior written permission of the National Apartment Association Education Institute (NAAEI).

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DISCLAIMERS Although NAAEI programs provide general information on apartment management practices, NAAEI does not guarantee the information offered in its

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statement of all information essential to proper apartment management in a given area. NAAEI, therefore, encourages attendees to seek competent professional

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agents, and employees assume no responsibility or liability for the consequences of an attendee's reliance on and application of program contents or materials in specific situations. Though some of the information used in scenarios and

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? 2014 National Apartment Association

ACKNOWLEDGMENTS

SUBJECT MATTER EXPERTS

The NAA Education Institute wishes to thank the following apartment industry professionals for contributing their time and expertise to the rewrite of the Certified Apartment Manager

E Research, Analysis and Evaluation program: Lead Subject Matter Expert L Susan E. Weston, CAM CAPS, NAAEI Faculty Licensed Texas Broker Professor, University of North Texas School of Business The Susan Weston Company P 2655 Mount View Drive Dallas, TX 75234-6239 972.308.6092 Office 972.415.6299 Cell susan@ M AKEY CONTRIBUTORS

? David Jolley, CAMT

S ? Howard L. Campbell, Ph.D.

? Fisher & Phillips, LLP ? Kimball, Tirey, and St. John, LLP ? Sue Weston, CAM, CAPS

? 2014 National Apartment Association

Certified Apartment ManagerSM Participant Guide

Financial Management

Financial Management Table of Contents

Chapter 1: Investments

1-1

Chapter Overview...................................................................................................................1-1

Background ............................................................................................................................ 1-2

Factors in Investment ............................................................................................................. 1-3

Investment Performance Measurements ...............................................................................1-5

Advantages and Disadvantages of Apartment Investments...................................................1-7

Apartment Ownership.............................................................................................................1-8

Mortgage Loans ................................................................................................................... 1-10

Chapter 2: Adding Value to the Investment

2-1

Chapter Overview...................................................................................................................2-1

Background ............................................................................................................................ 2-2

Rental Income ........................................................................................................................ 2-3

Factors that Affect Rental Rates ............................................................................................ 2-5

Rental Rate Adjustments........................................................................................................2-8

E Managing Occupancy...........................................................................................................2-15

Expenses .............................................................................................................................. 2-22

Chapter 3: Economic Analysis of a Property

3-1

L Chapter Overview...................................................................................................................3-1

Background ............................................................................................................................ 3-2

Financial Statements .............................................................................................................. 3-3

Concepts ................................................................................................................................ 3-4

The General Ledger ............................................................................................................. 3-11

P Chapter 4: Budgets

4-1

Chapter Overview...................................................................................................................4-1

Background ............................................................................................................................ 4-2

Types of Budgets ................................................................................................................... 4-3

Budget Development & Management..................................................................................... 4-5

M Chapter 5: Property Valuation

5-1

Chapter Overview...................................................................................................................5-1

Background ............................................................................................................................ 5-2

Ways to Determine Property Value ........................................................................................ 5-3

Toolbox

Toolbox-1

A Overview ..................................................................................................................... Toolbox-1

Annual Turnover Percentage ...................................................................................... Toolbox-3

Annualizing a Number ................................................................................................. Toolbox-3

S Average Effective Rent................................................................................................ Toolbox-4

Average Renewal Increase ......................................................................................... Toolbox-4

Average Square Feet/Unit ........................................................................................... Toolbox-5

Capitalization/Valuation ............................................................................................... Toolbox-5

Closing Percentage/Ratio............................................................................................ Toolbox-6

Continued on next page

? 2014 National Apartment Association

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Certified Apartment ManagerSM Participant Guide

Financial Management

Table of Contents, Continued

Cost of Advertising Per Lease ..................................................................................... Toolbox-6 Cost of Advertising Per Traffic..................................................................................... Toolbox-6 Effective Gross Income (Net Rental Income) .............................................................. Toolbox-7 Economic Occupancy Percentage .............................................................................. Toolbox-7 Effective Rent .............................................................................................................. Toolbox-8 Gross Potential Rent (GPR) ........................................................................................ Toolbox-8 Hourly Rate on Annual Basis ...................................................................................... Toolbox-9 Leasing Exposure...................................................................................................... Toolbox-10 Month-to-Month Leased Percentage ......................................................................... Toolbox-10 Net Operating Income (NOI)...................................................................................... Toolbox-11 Operating Expenses Per Unit (Annual) ..................................................................... Toolbox-11 Operating Expense Ratio .......................................................................................... Toolbox-11 Price Per Square Footage ......................................................................................... Toolbox-12 Prorated Rent ............................................................................................................ Toolbox-12 Daily Rate .................................................................................................................. Toolbox-12 Prorated Move-In/Prorate Move-Out Rent................................................................. Toolbox-12

E Projected Traffic Required to Meet Leasing Goals.................................................... Toolbox-13

Renewal Percentage ................................................................................................. Toolbox-13 Total Leased Percentage .......................................................................................... Toolbox-13

L Unit Type/Unit Mix Percentage.................................................................................. Toolbox-14

Vacancy Percentage ................................................................................................. Toolbox-14 Variance Percentage ................................................................................................. Toolbox-15 Weighted Average Rent ? Leased and Market.......................................................... Toolbox-15 Calculating Weighted Average Leased Rent............................................................. Toolbox-16

P Calculating Weighted Average Market Rent.............................................................. Toolbox-16

Market Comparison Survey Form.............................................................................. Toolbox-17 Weekly Activity Report Sample ................................................................................. Toolbox-18 Explanation of Weekly Activity Report....................................................................... Toolbox-19 Box Score Report Sample #1 .................................................................................... Toolbox-20

M Box Score Report Sample #2 .................................................................................... Toolbox-21

Leasing Activity Report Sample ................................................................................ Toolbox-24 All Units Summary Report Sample ............................................................................ Toolbox-25 Lease Expiration Report Sample............................................................................... Toolbox-26 Rent Roll Sample #1 ................................................................................................. Toolbox-27

A Rent Roll Sample #2 ................................................................................................. Toolbox-30

Delinquency Report Sample...................................................................................... Toolbox-33 Bank Deposit Summary Report Sample.................................................................... Toolbox-34

S Monthly Income Summary Report Sample................................................................ Toolbox-36

Monthly Transaction Summary Report Sample......................................................... Toolbox-37 Lost Rent Summary Report Sample.......................................................................... Toolbox-38 Concessions Report Sample ..................................................................................... Toolbox-39 Demographics Report Sample .................................................................................. Toolbox-41

Continued on next page

? 2014 National Apartment Association

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Certified Apartment ManagerSM Participant Guide

Financial Management

Table of Contents, Continued

Cash Flow Statement (Completed) ........................................................................... Toolbox-42 Cash Flow Statement Template ................................................................................ Toolbox-43 Sample General Ledger Extract Report .................................................................... Toolbox-44 Sample Chart of Accounts......................................................................................... Toolbox-45 Market Rent Schedule ............................................................................................... Toolbox-47

SAMPLE

? 2014 National Apartment Association

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Certified Apartment ManagerSM Participant Guide

Financial Management

Chapter Overview

Chapter 1 Investments

In this chapter The table below lists the topics in this chapter.

Topic

See Page

Background

1-2

Factors in Investment Investment Performance Measurements Advantages and Disadvantages of Apartment Investments Apartment Ownership

SAMPLE Mortgage Loans

1-3 1-5 1-7 1-8 1-10

? 2014 National Apartment Association

1-1

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