Certified Apartment Manager SM Reference Guide Risk Management Reference Guide Certified Apartment Manager℠ November 2016 Certified Apartment Manager SM Reference Guide Table of Contents Industry Essentials .....................................................................................................................................7. Apartment Ownership ........................................................................................................................................................8. Factors in Investment .......................................................................................................................................................1. 0 Housing Types ....................................................................................................................................................................1. 2 Apartment Building Types ...............................................................................................................................................1. 5 Apartment Types ...............................................................................................................................................................1. 6 Financial Management ...........................................................................................................................1. 8 Mortgage Loans .................................................................................................................................................................1. 9 Annual Turnover Percentage .........................................................................................................................................2. 2 Annualizing a Number ......................................................................................................................................................2. 2 Average Effective Rent .....................................................................................................................................................2. 3 Average Renewal Increase ..............................................................................................................................................2. 3 Average Square Feet/Unit ...............................................................................................................................................2. 4 Capitalization/Valuation ...................................................................................................................................................2. 4 Closing Percentage/Ratio ................................................................................................................................................2. 5 Cost of Advertising per Lease. .........................................................................................................................................2. 5 Cost of Advertising per Traffic .........................................................................................................................................2. 6 Economic Occupancy Percentage ................................................................................................................................ 2.6 Effective Market Rent .......................................................................................................................................................2. 7 Gross Potential Income (GPI) ..........................................................................................................................................2. 7 Gross Potential Rent (GPR) ..............................................................................................................................................2. 7 Hourly Rate on Annual Basis ...........................................................................................................................................2. 8 Leasing Exposure ...............................................................................................................................................................3. 0 Month-to-Month Leased Percentage...........................................................................................................................3 0 Net Operating Income (NOI)...........................................................................................................................................3. 1 Occupancy Percentage ....................................................................................................................................................3. 1 Operating Expenses per Unit (Annual) ..........................................................................................................................3 1 Operating Expense Ratio .................................................................................................................................................3. 3 © 2016 National Apartment Association ii Certified Apartment Manager SM Reference Guide Price per Square Footage ..................................................................................................................................................3 3 Pro-rated Rent .....................................................................................................................................................................3 3 Daily Rate ..............................................................................................................................................................................3 4 Pro-rated Move-In/Pro-rate Move-Out Rent ............................................................................................................. 34 Projected Traffic Required to Meet Leasing Goals ..................................................................................................... 35 Renewal Percentage ..........................................................................................................................................................3 5 Total Leased Percentage ...................................................................................................................................................3 6 Total Rent Revenue (Net Rental Revenue) .................................................................................................................. 36 Unit Type/Unit Mix Percentage ......................................................................................................................................3 6 Vacancy Percentage ...........................................................................................................................................................3 7 Variance Percentage ..........................................................................................................................................................3 8 Weighted Average Rent – Leased and Market ........................................................................................................... 39 Calculating Weighted Average Leased Rent ................................................................................................................ 39 Calculating Weighted Average Market Rent ............................................................................................................... 39 Marketing ..................................................................................................................................................4 0 Advertising ............................................................................................................................................................................4 1 Marketing Tools & Advertising Media .......................................................................................................................... 45 ABC Company Marketing Plan Sample ........................................................................................................................ 56 XYZ Company Marketing Plan Sample ......................................................................................................................... 64 Property Maintenance ............................................................................................................................7 1 Assigning and Evaluating Work .......................................................................................................................................7 2 Managing Inventory...........................................................................................................................................................7 6 Developing a Preventive Maintenance Program ....................................................................................................... 79 Risk Management ...................................................................................................................................9 1 Emergency Plan: Determining Type of Probability ................................................................................................... 92 Emergency Plan: Creating. ...............................................................................................................................................9 4 Evacuation Plan: Implementing ...................................................................................................................................1 00 Legal Responsibilities. ........................................................................................................................... 102 Department of Housing and Urban Development (HUD) .....................................................................................1 03 Goals of Federally-Assisted Housing ............................................................................................................................1 05 Section 8 Program ............................................................................................................................................................1 06 © 2016 National Apartment Association iii Certified Apartment Manager SM Reference Guide Management Agents ......................................................................................................................................................1 09 Creating a Positive Fair Housing Environment ..........................................................................................................1 11 Complying with the Law ................................................................................................................................................. 112 Cutting Edge Issues ........................................................................................................................................................... 11 4 Leasing Practices ...............................................................................................................................................................1 15 Resident Practices .............................................................................................................................................................1 19 Testing of Leasing Practices ............................................................................................................................................1 21 Fair Housing Complaints .................................................................................................................................................1 20 Federal Administrative Complaint Process ................................................................................................................1 23 Legal Obligation Basics .....................................................................................................................................................1 29 Negligence ..........................................................................................................................................................................1 30 FCC Ruling on Satellite Dishes, Central Antennas, and Exclusive Cable TV Contracts ......................................1 34 Human Resources ................................................................................................................................ 137 Fair Credit Reporting Act (FCRA) ...................................................................................................................................1 38 Title VII of the Civil Rights Act of 1964, as Amended ................................................................................................1 39 The Civil Rights Act of 1991 .............................................................................................................................................1 41 Age Discrimination in Employment Act (ADEA) .......................................................................................................1 42 Title I of the Americans with Disabilities Act ...............................................................................................................1 43 Fair Labor Standards Act (FLSA) .....................................................................................................................................1 45 FLSA Overtime Rules ........................................................................................................................................................1 49 Equal Pay Act ......................................................................................................................................................................1 55 Occupational Safety and Health Act (OSHA) .............................................................................................................1 56 Employee Retirement Income Security Act (ERISA) ................................................................................................1 59 Immigration Reform and Control Act (IRCA) .............................................................................................................1 60 National Labor Relations Act (NLRA) ............................................................................................................................1 61 Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) ..................................1 62 Jury Systems Improvement Act ....................................................................................................................................1 63 Employment Polygraph Protection Act ......................................................................................................................1 64 Family and Medical Leave Act (FMLA) ........................................................................................................................1 65 Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA), as amended ........................................1 67 Health Insurance Portability and Accountability Act of 1996 (HIPAA) .................................................................1 68 © 2016 National Apartment Association iv Certified Apartment Manager SM Reference Guide Employee Handbook ......................................................................................................................................................1. 66 Limiting Employer Liability .............................................................................................................................................1. 71 Workplace Violence ........................................................................................................................................................1. 73 Employee Training ...........................................................................................................................................................1. 75 Task Training ......................................................................................................................................................................1. 80 Group Training ..................................................................................................................................................................1. 81 Procedure Manuals .........................................................................................................................................................1. 83 Involuntary Termination ................................................................................................................................................1. 85 Exit Interviews ...................................................................................................................................................................1. 89 Sample Interview Evaluation Form .............................................................................................................................1. 91 Sample Exit Interview Guide .........................................................................................................................................1. 93 Job Description—Manager ...........................................................................................................................................1. 94 Job Description—Assistant Manager .........................................................................................................................2. 00 Job Description—Leasing Consultant .......................................................................................................................2 064 Job Description—Senior Maintenance Technician ................................................................................................ 2.12 Job Description—Assistant Maintenance Technician .............................................................................................2 19 Job Description—Groundkeeper ................................................................................................................................ 2.25 Job Description—Make-Ready Technician. ..............................................................................................................2. 31 Job Description—Housekeeper ...................................................................................................................................2. 36 Job Description—Painter ...............................................................................................................................................2. 41 Interview Guides Overview ...........................................................................................................................................2. 46 Interview Guide—Property Manager ........................................................................................................................2. 47 Interview Guide—Assistant Manager and/or Bookkeeper ..................................................................................2 51 Interview Guide—Leasing Coordinator and/or Leasing Consultant ...................................................................2 55 Interview Guide—Lead Maintenance Technician/Supervisor .............................................................................2 59 Interview Guide—Assistant Maintenance Technician and/or Make-Ready Technician ..............................2 63 Interview Guide—Groundskeeper .............................................................................................................................2. 66 Interview Guide—Housekeeper .................................................................................................................................2. 68 Interview Guide—Painter .............................................................................................................................................2. 70 The Resident Experience ......................................................................................................................2 72 Customer Service Opportunities .................................................................................................................................2. 73 © 2016 National Apartment Association v Certified Apartment Manager SM Reference Guide Applicant Screening Criteria ..........................................................................................................................................2. 74 Information About Co-Signers ......................................................................................................................................2. 75 Occupant Changes ..........................................................................................................................................................2. 76 Community Policies .........................................................................................................................................................2. 78 Criminal Activity ................................................................................................................................................................ 2.83 Move-Out Inspection .....................................................................................................................................................2. 84 Security Deposit Disposition ..........................................................................................................................................2. 88 Types of Property Management Systems ................................................................................................................2. 92 Sample Notice of Crime Incident Letter .....................................................................................................................2. 97 © 2016 National Apartment Association vi Certified Apartment Manager SM Reference Guide Industry Essentials Industry Essentials Reference Guide © 2016 National Apartment Association 7 Certified Apartment Manager SM Reference Guide Industry Essentials Apartment Ownership Forms of An investor’s financial goals and ownership objectives can dictate the type of ownership ownership structure an investor selects. After the investor identifies their goals and objectives, an appropriate ownership structure can be selected. The table below describes the ways to own or invest in a property and the advantages and disadvantages of each. Type Description Advantage Disadvantage Direct Ownership/ One individual owns and Formation and dissolution of There is unlimited liability and limited ability Sole Proprietor manages the property. business is easy and has a low to borrow. cost. Partnership Two or more people jointly own Formation of business is easy and There is unlimited liability and potential and manage property. has a low cost. There is increased difficulty in withdrawing investment from availability of capital and credit partnership and retention of profits. Limited Liability The limited partners contribute Liability is limited to the amount There is a lack of uniformity in state laws. Partnership capital but do not actively invested by each partner Some states have state insurance manage the business. requirements. There is joint and several liability. Limited Liability Most LLCs consist of two or more An LLC, like a limited liability Taxable in some states. There is a lack of Corporation members, but many states allow partnership, is recognized as a uniformity in states governing LLCs. a single-member LLC. separate legal entity from its members. Ordinarily, only the LLC is responsible for the company’s debts. S Corporations A corporation that is taxed as if it Shareholders can personally claim There are a limited number of shareholders were a partnership – the their share of losses incurred by providing less flexibility in income allocation. corporation’s income is taxed the corporation to offset personal only as the personal income of income. the shareholders. This is an effective way to avoid double taxation while retaining the legal benefits of incorporation. Continued on next page © 2016 National Apartment Association 8 Certified Apartment Manager SM Reference Guide Industry Essentials Apartment Ownership, Continued Forms of ownership, (continued) Type Description Advantage Disadvantage Real Estate Established by federal law in A REIT must, by law, pay virtually Investors have no control over when a Investment Trusts 1960. The purpose of a REIT is to all its taxable income to its company will sell its holdings or how it will (REITs). allow small investors to pool their shareholders every year. manage them. REITs are fairly liquid assets investments in real estate while also diversifying their risks, obtaining professional management and maintaining liquidity. Tenants in Common A TIC is a form of real estate asset This structure allows the Disadvantages include the newness of the (TICs) ownership in which there are two deferment of capital gains tax that investment structure and thus liquidity is or more persons of an undivided would be owed on a property unproven. fractional interest in an asset, that is sold. where ownership shares are not The TIC sponsor controls the hiring of the required to be equal and where Also, provides a way for someone management agent and investors have no ownership interest can be to be able to enjoy ownership in control over how the investment will be inherited. At closing, each co- an institutional type property with managed. owner receives an individual a lesser investment. deed to their undivided percentage interest in the entire TICs have also become a vehicle property. for investors looking for a new “1031” exchange. © 2016 National Apartment Association 9 Certified Apartment Manager SM Reference Guide Industry Essentials Factors in Investment Risk Risk refers to the possibility of losing some of your initial investment. Safety in an investment means minimal risk or loss. An investor must decide how much risk they are willing to take and how much loss they can afford. Any investment, no matter how small, involves risk. Common risks that affect multifamily housing investments include: • general economic and market conditions • job losses or job growth • political climate • supply/demand • interest rates • neighborhood conditions • population changes • household growth • the interaction of a group of real estate investments in a portfolio, and • the operations of the property itself Risk is also associated with time. Long-term investments are generally considered riskier because they are subject to the impact of more risks over time. An investor will expect higher returns on a long-term investment because they face risk for a longer period of time and wants to compensate for giving up some safety. Investments that have low risks, such as savings accounts or money market certificates, are typically associated with low returns. Conversely, when an investor chooses a riskier investment there is an expectation that the returns will be much higher. Low risk equals low return and high risk equals high return. Income The income factor refers to the expected income from an investment. To some extent, income depends on the amount of risk involved. Conservative investments, such as savings accounts and some bonds and stocks generally provide a predictable amount of interest or dividends each year. Riskier investments are perceived to have the potential of offering high returns. Income from investments may not always be in the form of cash. In some instances, an investment may act as a “shelter” against income taxes. Continued on next page © 2016 National Apartment Association 10